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business - theme 2 > Profit > Flashcards

Flashcards in Profit Deck (8)
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1
Q

What is profit

A

The difference between revenue and all the costs involved

2
Q

What is gross profit margin

What is gross profit

A

Gross profit / sales revenue X 100

Gross profit = revenue -cost of sales

3
Q

What is the operating profit margin

What is operating profit

A

Operating profit /sales revenue X 100

Operating profit = gross profit - fixed overheads

4
Q

What is Net profit margin

How do you work out profit of the year

A

Profit of the year / sales revenue X100

Profit of the year =operating profit -tax and interest

5
Q

What is profitability

A

The ability of a business to generate profits from its resources

6
Q

What is a profit margin

A

Tells a business what percentage of turnover is actually profit

7
Q

What are ways to improve profitability

A
Raising the price - depends on PED
Increase number of units sold 
Fixed costs spread over a range of goods reducing average costs 
Reducing costs 
Increase efficiency 

Cutting back on waste
Producing more output with same input

8
Q

Difference between profit and cash

A

Cash is in the form of money or bank deposits or assets

Profit is the difference between total sales revenue and total production costs