Theme 2.3 Flashcards
Profit
Surplus Money made by a business once total revenue exceeds total costs
Gross profit
Profit after costs of sales has been deducted and before expenses
Cost of sales
costs of raw materials or stock purchased to produce the goods or services sold in a given period of time
Operating profit
The firms profit after all other expenses have been deducted
Profit of the year
Profit after tax and interest has been to ducted
Statement of comprehensive income
A formal financial document that summarises the businesses trading activities and if they have made a profit or loss
Gross profit margin
Firms profitability by looking at the relationship between gross profit and sales revenue X 100
Operating profit margin
Relationship between operating profit and sales revenue X 100
Profit for the year margin
The relationship between profit for the year and sales revenue X100
How can profit be improved
Sell the same quantity at a higher price
Sell more at the current price
Sell all the same at the same price but reduced costs
Difference between cash and profit
Cash is crucial to the short-term survival of the business
Profit is important to the long-term success of the business
Liquidity
A measure of a businesses ability to meet day-to-day expenses and short-term debts
Statement of financial position
From a financial document that summarises the net worth of business at a given point in time
Current ratio
A measure of firms liquidity by comparing the value of CURRENT ASSETS to the value of current liabilities
Acid test ratio
The measure of a firms liquidity by comparing the value of LIQUID ASSETS to the value of current liabilities
