Business Calculations Flashcards
All 6 cards in this deck
What is the formula for gross profit?
Gross profit = sales revenue − cost of sales.
What is the formula for net profit?
Net profit = gross profit − other operating expenses and interest.
What is the formula for gross profit margin, and what does it show?
(Gross profit ÷ sales revenue) × 100. It shows the percentage of sales revenue left after paying the cost of sales.
What are the steps to calculate and interpret net profit margin?
e.g. net profit £400,000, sales revenue £900,000- Divide net profit by sales revenue: £400,000 ÷ £900,000
- Multiply by 100: 44.44% (to 2 d.p.)
- Interpret: 44.44p of every £1 of sales revenue is net profit.
What are the steps to calculate the average rate of return (ARR)?
e.g. total profit £500,000 over 5 years, machine costs £200,000- Total profit ÷ number of years: £500,000 ÷ 5 = £100,000
- Divide by cost of investment: £100,000 ÷ £200,000
- Multiply by 100: 50% per year.
What are the steps to calculate revenue for a month using figures read from a sales chart?
e.g. the chart shows a selling price of £5.20 and 7,200 units sold in March- Read the selling price and quantity sold for that month from the figure: £5.20 and 7,200.
- Revenue = selling price × quantity sold: £5.20 × 7,200.
- Revenue for March = £37,440.