Revenue, Profit & Loss Flashcards
All 16 cards in this deck
True or false? If a business's sales revenue has risen, its profit must have risen too.
False. Costs and expenses may have risen faster, so profit can fall even when revenue rises.
What is revenue?
The income earned by a business over a period of time from selling its goods or services.
What is the formula for revenue?
Revenue = selling price per unit × quantity sold.
What is the formula for profit?
Profit = total revenue − total costs.
When does a business make a loss?
When total costs are greater than total revenue.
True or false? Revenue and profit mean the same thing.
False. Revenue is all income from sales; profit is what is left after total costs are deducted.
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 gross profit?
The difference between the money received from selling goods and services and the cost of making or providing them, ignoring fixed costs or overheads.
What is cost of sales?
The costs incurred as a direct result of making a product or providing a service, such as raw materials.
What is net profit?
The profit left after every cost has been taken off: cost of sales, other operating expenses and interest. The business can reinvest it or pay it out to its owners.
What is the formula for percentage change?
Percentage change = ((new value − original value) ÷ original value) × 100
What is the formula for an average (mean) of a set of business figures?
Average = sum of the values ÷ number of values
Name two factors that can affect a business's revenue.
Any two of: the price of the product; the level of sales; the number and actions of competitors; demand factors such as quality and customer service; the size of the product range.
Give two reasons why profit is important to a business's future.
Any two of: to fund expansion or new equipment; to develop new products; to pay dividends to shareholders; to repay loans; to attract new investors; to avoid the cost of other finance.
Can raising the price of a product increase revenue even though fewer are sold?
Yes, if sales fall by a smaller proportion than the price rises. If too many customers stop buying, revenue falls.