profit

Question 1

What is cost of sales?

Answer 1

The cost of producing a product.

It is the total of all the direct costs like stock, raw materials and labour.

Question 2

What is gross profit?

Answer 2

The money left once the cost of sales is taken away from the revenue. Gross profit tells you how much money a business has made before expenses like salaries and rent are taken away. Gross profit can be either positive or negative.

Question 3

How do you calculate gross profit?

Answer 3

revenue - cost of sales = gross profit

Question 4

The larger the gross profit, the greater the chance of a positive net profit.
True or false?

Answer 4

True

Question 5

positive gross profit always means that net profit will be positive.
True or false?

Answer 5

False, positive gross profit doesn’t always mean that net profit will be positive.

Question 6

If the gross profit is negative, there is nothing left to deduct overheads from. What does this mean?

Answer 6

This means there will be no chance of the business making a net profit.

Question 7

What is net profit?

Answer 7

The money left over once all costs have been deduced.

Question 8

What does the gross profit need to be in order to make a net profit?

Answer 8

The gross profit need to be positive,

Question 9

What formula is used to work out net profit?

Answer 9

gross profit- expenditure= net profit

Question 10

What does it mean if a business is making a positive net?

Answer 10

It means that it is making a profit.

Question 11

What does it mean if the net profit is negative?

Answer 11

The business is said to be operating at a loss.