2.4 Making Financial Decisions

Cards (9)

What is the calculation for gross profit?
Gross Profit = revenue - cost of sales
What is gross profit?
The profit a firm makes after the cost of making products (cost of sales) is taken into account
How do you calculate revenue?
Revenue = sales price X quantity sold
What is the calculation for net profit?
Net profit = gross profit - (operating expenses + interest )
What is the calculation for average rate of return (ARR)?
ARR = average annual profit/cost of investment X 100
What is the calculation for average annual profit?
Average annual profit = total profit/number of years
What is net profit?
The profit a firm makes when all expenses (operational expenses, interest paid on loans and cost of sales) are taken into account
What is the equation for gross profit margin?
Gross profit margin = gross profit / sales (revenue) X 100
What is the equation for net profit margin?
Net profit margin = net profit / sales (revenue) X 100