T34- Profit

• Profit = total sales - total costs
• gross profit = revenue - cost of sales
• operating profit = gross profit - operating expenses (expense & overheads)
• profit for the year = operating profit - finance costs
• what are finance expenses?

  Interest paid on the bank and other borrowings, less interest income received on cash balances. A useful figure for shareholders to assess how much profit is being used up by the funding structure of the business.
• what is taxation?

  An estimate of the amount of corporation tax that is likely to be payable on the profits for the period.
• What is profit for the year?

  The amount of profit that is left after tax has been accounted for. Shareholders then decide how much of this is paid out to them in dividends and how much is left in the business (retained profits)
• gross profit margin = gross profit / revenue x 100
• operating profit margin = operating profit / sales revenue x 100
• net profit margin = net profit (before tax)/ revenue x 100
• what does operating profit show?

  Operating profit margins effectively shows how a business turns it sales into profit and how well it manages its operating expenses. It can be difficult to compare operating profit margins and should only be compared with other competitors in the same market.
• what are ways to improve profit?

  Increase sales, reduce fixed costs, improve efficiency, improve marketing, increase Selling price
• What is profit?


  the difference between total revenues and total costs over a period
• What is cashflow?


  the difference between total cash inflow and total cash outflows over a period