Measuring and increasing profit Flashcards
1
Q
What is profit margin?
A
The profit made as a proportion of sales revenue.
2
Q
What is gross profit?
A
This is when only the variable costs are taken away from the sales revenue, ignoring fixed costs.
3
Q
What is net profit?
A
This is calculated by taking the total costs away from the sales revenue.
4
Q
What is the calculation for gross profit margin?
A
Gross profit/sales revenue x 100
5
Q
What is the calculation for net profit margin?
A
Net profit/sales revenue x 100
6
Q
What is Return on capital?
A
The proportion that the net profit is of the capital invested in the business or project.
7
Q
Calculation for return on capital?
A
Net profit/capital invested x 100
8
Q
Methods of increasing profit?
A
Increase sales
Reduce variable costs per unit
Reduce fixed costs.
