2.4

• What is the relationship between gross profit and net profit?

  Net profit is gross profit minus operating expenses
• What is the formula for calculating gross profit?

  Revenue - cost of sales
• What are operating expenses?

  Costs not directly involved in production
• If gross profit is £400,000 and operating expenses are £300,000, what is the net profit?

  £100,000
• What does the profit margin indicate?

  Percentage of revenue kept as profit
• How do you calculate gross profit margin?

  (Gross profit / sales Revenue) × 100
• What is the formula for net profit margin?

  (Net profit / sales Revenue) × 100
• What happens to profit margins if manufacturing costs are high?

  Profit margins decrease
• What are the steps to calculate profit margins?

  • Identify the type of profit (gross or net)
  • Use the formula: (Profit / Revenue) × 100
  • Interpret the result as a percentage of revenue
• What does the average rate of return measure?

  Percentage profit from an investment
• If an investment costs £1 million and earns £500,000 annually, what is the average rate of return?

  50%
• What is the significance of profit margins in business?

  • Indicates profitability
  • Helps assess financial health
  • Guides pricing strategies
• What is required for profit margin calculations?

  Revenue must be higher than costs
• What does the average rate of return measure?

  Percentage of investment cost earned as profit
• If an investment is £1 million with an average profit of £500,000, what is the average rate of return?

  50%
• How do you calculate the average rate of return for an investment of £400,000 with a profit of £100,000?

  £100,000 / £400,000 × 100 = 25%
• What are the types of graphs and charts used in business data analysis?

  • Line graphs: Show trends over time
  • Bar charts: Compare different categories
  • Pie charts: Show proportions of a whole
• What is the benefit of using a line graph?

  It shows trends over time effectively
• When is a bar chart most effective?

  For making comparisons between categories
• What is the best use of a pie chart?

  To show proportions of a whole
• What is an example of data that can be represented in a pie chart?

  Market share of different businesses
• What should you consider when analyzing market share?

  The size of the market and context
• What is a limitation of using data for business decisions?

  Data may be based on projections
• Why is it important to prioritize the right data in decision-making?

  To avoid poor business decisions
• What should you do to gain confidence in calculations?

  Practice with past papers and resources
• What are the key components of financial data analysis?

  • Gross profit and net profit
  • Identifying strengths and weaknesses
  • Understanding calculations and their meanings
• What types of market research data are there?

  • Primary market research
  • Secondary market research
  • Market share and market size
• What is a potential issue with having a high market share in a small market?

  It may not be as valuable as low share in a large market
• What is a common mistake when evaluating pros and cons for decisions?

  Ignoring the significance of a single con
• What is the best approach when interpreting data for business decisions?

  Be critical and consider context
• What strategies can help improve understanding of business calculations?

  • Practice calculations regularly
  • Use flashcards for key terms
  • Engage in practical applications
• how do you calculate the average rate of return (%) ?

  average annual profit (total profit/number of years) / cost of investment x 100