calculations and key knowledge Flashcards
gross profit
revenue- cost of sales
gross profit margin in percent
gross profit
—————- X 100
revenue
net profit
gross profit - expenses
net profit margin
net profit
————— X 100
revenue
benefits of calculations ( ratio analysis)
- useful to compare to previous years
-useful to compare to rivals - useful for stakeholders such as potential/ existing shareholders
average annual profit
total profits
——————
years
average rate of return ( ARR)
total profits
————————— X 100
cost of investment
profit calculation
revenue- total costs
total costs calculation
fixed costs. + variable costs
variable costs
variable costs per unit X units
advantages and disadvantages of acting ethically
ADVANTAGE : improved rep
brand loyalty
competitive advantage
higher price
DISADVANTAGE: ethics profit trade off
impact of interest rate changes on producers
if interest increases it is more expensive to borrow money. impacting businesses that rely on overdrafts and loans for finance. higher costs and lower profits
high interest will make investments such as machinery more expensive potentially influencing business to reduce investment levels
interest range changes impact on consumers
high interest rates will make it more expensive to borrow money and therefore encourage saving and discourage borrowing. as a result customers will have less disposable income so demand for goods and services will fall
advantages if globalisation
- easier to sell products abroad
- locate cheaper raw materials
-access to cheaper labour
disadvantages of globalisation
- increased foreign competition
- depends heavily on exchange rates
