2.3.1

• profit 


  sales revenue - total costs
• types of profit 


  gross

  operating

  net
• sales revenue


  money coming in from sales
• sales revenue calculation 


  quantity sold X selling price
• cost of sales 


  the cost directly linked to the production of the goods or services sold
• gross profit calculation 


  sales revenue - cost of sales
• operating profit calculation


  gross profit X expenses
• net profit calculation 


  operating profit - interest and taxes
• grodd profit margin 


  measure of a firms profitability by looking at the relationship between gross profit and sales revenue
• operating profit margin 


  relationship between operating profit ad sales reveune
• net profit margin is low

  indicates gross and operaing profits are in decline

  interest rates have changes

  taxation rates have changed
• improving profitability and profits

  same quanity but higher prices

  sell more at the same price

  same price but lower costs
• difference between cashflow and profits

  profits exist in financial records when total revenue if greater then total costs

  cash in the physical existance of money

  cash flow is the timiing of cash flowing in and out of the business

  profitable businesses can fail because of the lack of cash