Profit

Question 1

Gross profit formula

Answer 1

Revenue - cost of slaes

Question 2

Operating Profit

Answer 2

Gross profit - operating expenses

Question 3

Net profit

Answer 3

operating profit - interest (and exceptional costs)

Question 4

Gross profit margin

Answer 4

(gross profit / revenue) x 100

Question 5

Operating profit margin

Answer 5

(operating profit / revenue) x 100

Question 6

Net profit margin

Answer 6

(net profit / revenue) x 100

Question 7

3 ways to improve profitability

Answer 7

1) Raising prices - it will get more revenue for every product sol and if costs remain the same, profitability should improve
2) lowering costs - raises profit margins, cna be achieved by using cheaper resources or using more existing resources more effectively
3) Being mroe efficient - introducing new working practices or training staff to be more skilled and effiecient

Question 8

Differences between cash and profit

Answer 8

1) if goods are sold on credit and money is owed, the business has more profit than cash
2) business may receive cash at beginning of year from the sales of the previous year, would increase cahs balance but not effect profit made
3) purchases of fixed assets will reduce cash balances but will have no effect on profit