Calculations of profit

Question 1

What is gross profit ?

Answer 1

The difference between revenue and the costs of sales

Question 2

How to calculate gross profit ?

Answer 2

GP = Revenue - cost of sales

Question 3

What is operating profit ?

Answer 3

This takes into account the other operating expenses on top of gross profit.

Question 4

How to calculate operating profit ?

Answer 4

OP = Gross profit - other operating expenses

Question 5

What is the profit for the year (net profit) ?

Answer 5

The ‘actual’ profit the business has made (taking into account the interest)

Question 6

How to calculate the profit for the year (net profit) ?

Answer 6

Operating profit +/- interest

Question 7

What are profit margins ?

Answer 7

It compares the profit figure to sales revenue (the proportion of sales revenue that has been converted to profit)

Question 8

How to calculate gross profit margin ?

Answer 8

GPM = Gross profit / Revenue x100

Question 9

How to calculate operating profit margin ?

Answer 9

OPM = Operating profit / Revenue x100

Question 10

How to calculate the profit of the year margin (net profit) ?

Answer 10

PTYM = Profit for the year / Revenue x100