Making financial decisions Flashcards
gross profit
the profit a business makes on its trading activity before any indirect costs
net profit (bottom line)
the profit a business is able to return to shareholders or reinvest into the business
How can a business improve profit?
lowering costs or increasing revenue
The problem with increasing revenue is. . .
the method used can also increase costs
The problem with lowering costs is . . .
detracting from the value and reducing the business’s ability to make revenue
What is a profit margin?
the ratio of profit compared to the sales revenue
What is a gross profit margin?
the proportion of sales revenue turned into gross profit
What is net profit margin?
the proportion of sales revenue turned into net profit
What is meant by the average rate of return?
average annual amount of profit generated over the life of an investment
Why do businesses use quantitative data?
to make informed decisions
What are some ways a business will use data?
- monitor performance
- compare performance to competition
- anticipate needs of customers
- identify trends in markets
- make business decisions
- set business aims and objectives
Why are graphs and charts created using quantitative data?
- demonstrates correlation between sets of data
- representation of proportions
- makes forecasts
- shows trends
- measures performance
- identify unusual factors/events and their impacts
A graph is a . . .
visual representation of business data
A chart is . . .
easy to interpret visual representation showing differences in information
Quantitative data
information expressed in numbers
