7 - Profits Flashcards
What 2 types of profit can a business use to analyse profitability?
Gross profit
Operating profit
What is meant by “gross profit”?
Profit after the costs of sales have been paid
What is the formula for the gross profit margin?
Gross Profit Margin = (Gross Profit / Sales Revenue) X 100
What might supermarkets use gross profit margin targets for?
To compare yearly performance
What would a decrease in gross profit margin lead to a reducement of?
Cost of sales
What does a “profit for the year target” involve?
Profit once all costs are considered
What is the formula for the “profit for the year” margin?
(Profit For The Year / Sales Revenue) X 100
Why might a business decide to focus on improving profitability?
As part of their aims and objectives
What can a business reduce to increase profit?
Fixed and variable costs
What can a business increase to increase profit?
Selling price per item
What 3 things might reducing fixed and variable costs affect?
Quality, sales and revenue
What can an increased sales price deter customers from? What 2 things can this decrease?
Purchasing products
Sales volume and market share
How did Morrisons reduce costs to increase profitability in 2015?
They removed department supervisors
What is the business’s operating profit if profit is £4.5 million and indirect costs are £750k?
£3.75 million
