Business Accounts Flashcards
What is the formula for Net profit
Net profit = Gross profit - Expenses
What is the formula for gross profit
Gross profit= Sales revenue - Cost of sales
What is gross profit
The difference between sales revenue and the cost of making a product or producing a service (cost of sales)
It is the trading profit
You can see if the cost of sales are too high
Can be used to work out gross profit margin to make comparisons
What is net profit
The profit or loss made by a business after all costs have been accounted for
It is the final profit of a business
Can be used to work out net profit margin to make comparisons
Can see if expenses are too high
What does the gross profit margin show
It measures the profitability of a business before expenses are deducted
What does the net profit margin show
It measures the profitability of a business after expenses have been deducted
What does the ROCE ratio show
The return on capital employed measures the percentage return on the money invested into the business
What does the current ratio show
It measures the ability of a business to pay its bills
What does the acid test ratio show
It measures the ability of a business to lay its bills without the value of the stock
What does the debtor payment period measure
It measures how many days it takes customers to pay you
What does the creditor ratio measure
It measures how long it takes a business to pay its creditors
What are fixed assets
Owned by a business for over a year e.g. Machinery, buildings, vehicles
What are current assets
Owned by a business for under year e.g. Stock
What are current liabilities
Owned by a business and have to be paid back in less than a year e.g. Creditors (suppliers) and bank overdrafts
What are debtors
People/businesses that owe money to a business e.g. Customers
