miss duddigan-managing finance Flashcards
how do you measure percentage change in profit
current years profit-previous years profit divided previous years profit times 100
what are the three measurements of profit
gross profit
operating profit
net profit
gross profit
amount left over when costs of sales is subtracted from revenue
what is profit
difference between total revenue and total costs
what is the cost of sales
costs directly related to making product e.g cost of raw materials
gross profit calculation
total revenue-cost of sales
operating profit calculation
gross profit-other operating expenses
net profit calculation
operating profit-interest
revenue
how much money coming into a business
expenses
how much money coming out of a business
profit margins
show how profitable a business is
measure relationship between profit and revenue
gross profit margin calculation
gross profit divided by revenue times 100
net profit margin calculation
net profit divided by revenue times 100
operating profit calculation
operating profit divided by revenue times 100
ways a business can improve their profit margins
increasing their revenue
could do this by increasing their prices
could also reduce costs of sales by getting cheaper suppliers
why are cash and profit not the same
cash-what a business has now to pay its bills
profit-may not get profit staright away
customers may not pay staight away etc
balance sheets (statement of financial position)
snashop of a fixed point in time
shows businesses assets (things they belong)
shows businesses liabiities (money business owes)
also show capital
and how they souce that capital e.g loans
net assets calculation
net current assets +non current assets - non current assets
non current assets
assets business is likely to keep for more than a year
e.g porperty, land
current assets
assets business likely to exchange for money within a year
e.g stock inventory
current liabilities
debts that need to be payed off within a year
e.g. tax, overdrafts
non current liabilities
debts business will pay off within several years e.g. mortgages
what are bad debts
debts that aren’t payed back
liquidity
how easily an asset can be turned into cash to buy things
cash is very liquid, non current assets e.g factories are liquid
