Financial Decisions

Question 1

What is Gross Profit?

Answer 1

The money made from selling the product after the cost of producing the product has been deducted

Question 2

What is the formula for Gross Profit?

Answer 2

Revenue - Cost of Sales

Question 3

What are Cost of Sales?

Answer 3

The costs only associated with making the product. e.g. raw materials and product packaging.

Question 4

What is Net Profit?

Answer 4

The amount of money left when all expenses are deducted from the gross profit figure.
Net profit is also referred to as the bottom line.

Question 5

What is the formula for Net Profit?

Answer 5

Gross Profit - Expenditure

Question 6

What are Expenses?

Answer 6

All the direct costs of an enterprise. These are the costs not associated with the products the enterprise sells. e.g. rent, administration, salaries of managers, utility bills, advertising

Question 7

What are examples of Investment options?

Answer 7

-Expand premises
-Employ more staff
-Expand product range
-Technology
-Distribution equipment
-Marketing campaign

Question 8

What is the formula for Average annual profit?

Answer 8

Total profit/Number of years

Question 9

What is the formula for Averge Rate of Return?

Answer 9

(Average annual profit/cost of investment) x100