1.6.3 profits and loss Flashcards
(10 cards)
How does profit act as a signal in the market?
Gives firms an incentive to enter or leave a market.
What is a statement of comprehensive income? What does it show?
A profit and loss account, showing the revenue and expenses of a firm. It gives an overview of the firm’s financial position
How is gross profit calculated?
Total Sales - Cost of the Goods Sold
What is the formula for gross profit margin?
Gross Profit / Revenue x100
How can gross profit margin be increase?
By raising prices and decreasing costs.
What is operating profit?
The profit earned from the core business operations. This excludes profit from investment, interest and taxes.
How is operating profit calculated?
Revenue - Costs of Goods Sold - Operating Expense
What is the formula for operating profit margin?
Operating Profit / Revenue x 100
What is net profit?
The total earnings left after all expenses, interest and taxes have been taken off.
How is net profit calculated?
Total Revenue - Total Expenses.
