Measuring profitability Flashcards
What is profitability
Efficiency of a business generating profit
What is gross profit margin
Measure of businesses profitability
Looks at the relationship between gross profit and sales revenue
What does low gross profit margin suggest
ineffective cost of sales management
What is mark up
Measure of a businesses profitability by looking at the relationship between gross profit and cost of sales
What does low mark up indicate
Ineffective cost of sales management
What are profit margins
Measure of a businesses profitability by looking at the relationship between profit and sales revenue
What does low profit margin indicate
Ineffective expenses management
What is return on capital employed(ROCE)
Measures how efficiently a business is using capital employed to generate profits
