Profit 2.3.1 Flashcards
Define profit.
Profits are the surplus of revenue over costs.
What is the calculation to find Profit?
total revenue – total costs = Profit
What are the three types of Profit?
- Gross profit
- Operating profit
- Profit for the year (Net Profit)
What is a Statement of comprehensive income?
A formal financial document that summarises a business’ trading activities and expenses to show whether it has made a profit or loss
What is the calculation for Gross profit?
Gross profit = sales revenue – cost of sales
How do you calculate Operating profit?
Operating profit = gross profit – expenses
What is Gross profit?
Gross profit is a company’s profit before operating expenses.
What is Operating profit?
A profit from business operations before deduction of interest and taxes.
What is Profit for the year?
The amount of profit the company made in a year.
What is Profitability?
Profitability measures the financial performance of a business by comparing profits achieved to a second variable e.g. revenue.
What are the 3 profitability ratios?
- Gross profit margin
- Operating profit margin
- Profit for the year (net profit) margin
What is Gross profit margin?
Gross profit margin (GPM) is a measure of a firm’s profitability by looking at the relationship between gross profit and sales revenue
How do you calculate Gross profit margin?
Gross profit / Sales revenue x 100
What is Operating profit margin?
Operating profit margin (OPM) is a measure of a firm’s profitability by looking at the relationship between operating profit and sales revenue
What is the calculation for Operating profit margin?
Operating profit / Sales revenue x 100
What is the profit of the year (net profit) formula?
Net profit / sales revenue x 100
What is the profit of the year margin formula?
Profit of the year/ sales revenue x100 = %
State 3 ways of increasing profitability
- Sell the same quantity but at a higher price.
- Sell more at the current price.
- Sell the same at the same price but reduce costs.
What’s the difference between profit and cash?
Not all cash paid into a business is profit. A business must pay its costs from the money that comes into it. Once all costs have been deducted from all revenue, the amount that is left is the business’ profit.
