2.4

• what is the formula for gross profit

  revenue - cost of sales
• what is cost of sales the same as

  variable costs
• what is the formula for net profit

  gross profit - other operating expenses
• what is other operating expenses the same as

  fixed costs
• what is the formula for gross profit margin

  gross profit/revenue x 100
• what is the formula for net profit margin

  net profit/revenue x 100
• what is the formula for average rate of return

  average yearly profit/initial capital outlay x 100
• what is quantitative data

  numerical and statistical data that a business can put on a graph and analyse
• what is marketing data

  data that has been collected by primary and secondary market research
• what is financial data

  financial information about how the business has performed in the past by analysing previous financial accounts and records
• what are some examples of financial data

  revenue data, historic share price, profit/loss accounts, cash flow forecast data, selling price data
• what is market data

  data about the state of the market that the business operates in
• what are examples of market data

  numbers of competitors in the same market, whether the market is growing or declining, cost information from different suppliers, target customers of each business within the market, the market share of each business within the market
• what are some uses of financial data

  • a balance sheet is a snap shot in time so you can tell what the business owes and owns
  • income statements shows if a business is making a profit or loss for the year
• what are the limitations of financial data

  • financial information published by a business is open to interpretation
  • accounts are produced by humans so is open to human error
  • different businesses may produce their accounts in different ways
• what are the uses of using data to make business decisions

  • owners and managers can use the data to make long term decisions for the business
  • suppliers can use the information to see if the business is credit worthy (when a business I applying for trade credit)
  • a bank would use the data to see if a business can get a loan
• what are the limitations of using data to make business decisions

  • financial statements only discuss financial information and not any social or environmental factors
  • financial statements are historical and so may not be useful to managers to plan
  • financial statements don't consider any qualitative information