Gross and Net Profit Flashcards
1
Q
What is the cost of sales?
A
the cost of producing a product.
2
Q
What is the gross profit?
A
tells you how much money a business has made before expenses such as rent and salaries are taken away.
3
Q
How do you find gross profit?
A
revenue - cost of sales
4
Q
The larger the gross profit…
A
the greater the chances of a positive net profit.
5
Q
Positive and negative gross profit:
A
- positive gross profit doesn’t mean positive net profit.
- if gross profit = negative, there is nothing left for the business to deduct overheads from. No chance of making a net profit.
6
Q
What is net profit?
A
Money left once all costs have been deducted. (to make net profit, gross profit must be positive).
7
Q
How do you calculate net profit?
A
gross profit - expenditure
8
Q
Positive net profit =
Negative net profit =
A
making a profit
making a loss
9
Q
What could a business use its profit for?
A
- expanding the business
- pay shareholders
- put money aside for unexpected costs.
