Profit

Question 1

What is the calculation for Gross Profit?

Answer 1

Total revenue - Cost of sales

Question 2

What is the calculation for Operating Profit?

Answer 2

Gross profit - Fixed overheads

Question 3

What is the calculation for Net Profit?

Answer 3

Operating profit - (Net financing cost + Corporation tax)

Question 4

What are fixed overheads?

Answer 4

The costs that have to be paid no matter how well the business is performing such as management salaries and rent on the head office.

Question 5

What are Net financing costs?

Answer 5

The income from interest on bank deposits minus the interest chargers from overdrafts and loans, usually a negative number.

Question 6

What are 2 ways you can improve profit?

Answer 6

• Increase revenue
• Reduce costs
• Or do a combination of the 2

Question 7

What is the calculation for Gross Profit Margin?

Answer 7

(Gross profit / Sales revenue) x 100

Question 8

What is the calculation for Operating Profit Margin?

Answer 8

(Operating profit / Sales revenue) x 100

Question 9

What is the calculation for Net Profit Margin?

Answer 9

(Net profit / Sales revenue) x 100

Question 10

What are ways to improve profitability?

Answer 10

• Increase selling price

- Cut costs