Managing Finance Flashcards
What is profit?
The financial gain of a business through trading
What is gross profit?
the selling price of your product minus the cost of producing it
What is operating profit?
the money left after paying all business costs, but before paying tax
What is net profit?
the sales income minus all the business costs
What is the gross profit formula?
GP = SR - Cost of sales
What is the operating profit formula?
OP = GP - Expenses
What is the Net Profit Formula?
NP = OP - Interest
What is the Gross Profit Margin formula?
GP Margin = Gross profit
——————— X100
Sales Revenue
What is the operating profit margin formula %?
OP Margin = Operating Profit
__________________ X100
Sales Revenue
What is the Net profit margin formula %?
NP Margin = Net Profit
__________________ X100
Sales Revenue
What are the differences between Profit and Cash?
- Profit is recorded straight away
- A business can trade for many years without profit
- Cash will not be recorded until it is paid out or received which could be in a different trading year
- A profitable business may go bust if it runs out of cash to pay a supplier or wages of staff
What are non-current (fixed) assets?
Item/assets that the business buy in order to run the business eg. equipment and Buildings
What are current assets?
Items which are bought to be turned into cash within a year eg. Stock
What are liabilities?
Assets or money owed to others
What are examples of non-current (long-term) liabilities?
Mortgage, loans, lease