profit and expenses Flashcards
what does the term ‘profit’ used to describe?
describe different aspects of the enterprise’s finances.
when does the enterprise take action?
if gross profit or net profit is negative
expenses
are the indirect costs of the enterprise
what are expenses not directly associated with?
making a product (cost of sales).
what are 5 examples of expenses?
• wages and salaries
• rent on premises
• heating and lighting
• delivery vehicles
• business insurance.
what are the expenses also known as?
the enterprise’s expenditure
net profit
the money remaining after deducting expenses (expenditure) from gross profit.
how do you calculate net profit?
Net profit = Gross profit - Expenditure
retained profit
when net profit can be paid out to the owners of the enterprise or it may be kept within the enterprise as retained profit
what can retained profit be used to finance?
the growth of the enterprise
give one example of a retained profit?
purchasing new machinery or moving into larger premises.
how do you calculate the retained profit?
Retained profit = Net profit - Amount of net profit paid to owners of enterprise
what does it mean for an enterprise if their gross profit is a positive figure?
the enterprise’s revenue is greater than its cost of sales.
gross profit: when to take action
when gross profit is a negative figure, how can you increase the sales revenue?
increasing the number of sales or prices of products
gross profit: when to take action
when gross profit is a negative figure, how does an enterprise reduce cost of sales?
by buying cheaper raw materials, buying in bulk, changing suppliers or negotiating discounts with existing suppliers
