2.4 - making financial decisions Flashcards
1
Q
gross profit calculation
A
sales revenue - cost of sales (all related to the product)
2
Q
net profit calculation
A
gross profit - all other operating expenses
3
Q
gross profit margin calculation
A
(gross profit/sales revenue) x 100
4
Q
net profit margin calculation
A
(net profit/sales revenue) x 100
5
Q
ARR calculation
A
(average annual profit or total profit/number of years)/cost of investment. x 100
6
Q
why does business use quantitative data
A
- monitor performance of business
- compare performance with competitors
- anticipate customer needs by identifying trends in market
- make business decisions e.g. production volume
- set aims and objectives
7
Q
limitations of quantitative data
A
- it is based on the past, so not reliable for making future desisons
- business performance is also affected by qualitative factors such as employee motivation and brand image
