Measuring and increasing profit

Question 1

Methods of improving profit?

Answer 1

Increasing prices (may reduce demand though)

or reducing prices to increase demand (demand may not increase)

reduce production costs (may result in worse quality product)

advertising (may be expensive and no guarantee)

improving quality (as long as it doesn’t outweigh profit that could be made)

Question 2

What are the different ways of reporting profit?

Answer 2

Gross profit

Operating Profit

PFTY

Question 3

What is gross profit

Answer 3

Amount left over when cost of sales is subtracted from sales revenue

Question 4

What is operational profit?

Answer 4

Takes into account all revenues and costs from regular trading but not one off things

Question 5

What is PFTY?

Answer 5

Takes into account everything from the others and one off events/interest payments and tax.

Question 6

Equation for Gross profit?

Answer 6

Sales revenue - cost of sales

Question 7

Equation for Operational profit?

Answer 7

Sales Revenue - Cost of Sales - Operating Expenses

Question 8

Equation for PFTY?

Answer 8

Operating profit + Other profit - Net financial costs - Tax