GP

• What is the purpose of the income statement in calculating profits?

  To find information for gross and net profit
• Why is calculating gross profit and net profit vital?

  It is essential for ratio analysis
• What are the two types of profit discussed in this session?

  Gross profit and net profit
• What is the difference between gross profit and gross profit margin?

  Gross profit is a monetary value; margin is a ratio
• What is the formula to calculate gross profit?

  • Gross Profit = Sales Revenue - Cost of Sales
• If sales revenue is $200,000$ pounds and cost of sales is $50,000$ pounds, what is the gross profit?


  Gross profit is $150,000$ pounds
• What is a common mistake when calculating gross profit?

  Forgetting to include thousand pounds
• How do you calculate net profit?

  • Net Profit = Gross Profit - Operating Expenses
• If gross profit is $150,000$ pounds and operating expenses are $100,000$ pounds, what is the net profit?


  Net profit is $50,000$ pounds
• What is the importance of calculating net profit?

  It helps in assessing overall profitability
• What should you always watch out for when calculating profits?

  Ensure correct values are used in calculations
• What are the key components of an income statement for profit calculation?

  • Sales Revenue
  • Cost of Sales
  • Operating Expenses