9 - Profit

Question 1

gross profit

Answer 1

the difference betwee revenue and the cost of sales
before any costs are taken into account

Question 2

gross profit =

Answer 2

revenue-cost of sales

Question 3

operating profit

Answer 3

takes into account operating expenses on top of gross profit

Question 4

operating profit =

Answer 4

gross profit - other operating expenses

Question 5

profit for the year

Answer 5

the ‘actual’ profit that the business has ade (taking into account interest

Question 6

profit for the year =

Answer 6

operating profi +/- interest

Question 7

profit margin

Answer 7

it comapres the profit figures to sales revenue
the porpotion of sales revenue taht has been converted to profit

Question 8

gross profit margin

Answer 8

inciates how well a business has performed in terms of direct trading activity

Question 9

gross profit margin =

Answer 9

gross profit / revenue x100

Question 10

operating profit margin

Answer 10

takes into account direct and indirect costs. useful to use alongside the gross profit margin

Question 11

operating profit margin =

Answer 11

operating profit/revenue x 100

Question 12

profit of the year margin (net profit)

Answer 12

takes into account all revenue and costs
identify is shareiders will be paid a dividend

Question 13

net profit margin

Answer 13

net profti/revenue x 100

Question 14

statement of comprehensive income
and the balance sheet

Answer 14

companies produce two key documents

Question 15

statement of comprehensive income

Answer 15

communicate sthe rveenue generated by a business and then its profits at variosu levels following a series of expenses and exceptional incomes

Question 16

what can be found from a balance sheet

Answer 16

chanegs in sales revenue
changes in direct cost of sales
profitbility of a business
unusual incomes or expenses through the year
how well oprating costs are managed

Question 17

ways of increasing revenue

Answer 17

• increase prices
• reduce process
• create awarness and desire through marketing
• add value

Question 18

why may a business be unprofitable

Answer 18

• no demand
• wrong pric
• low contribution per unit
• poor managment of costs
• overexpansion

Question 19

ways to reduce costs

Answer 19

• reduce production costs
• improve efficiency
• imporve capacity utilisation
• elimate unprofitable processes
• lower overheads

Question 20

cash vs profits

Answer 20

a business can not be profitable if it doesn tmanage it scashflow. it is a question of timing and is crucial to the businss

Question 21

balance sheet

Answer 21

records teh assets and liabiltiies of a business. gives a snapshot of the value and financial strngth of a business

Question 22

what can we find out on a balance sheet

Answer 22

• value of the business
• current assets
• liabiltiies
• liquidity
• debts
• how a business has been financed