| What is Gross Profit? | -This is simply the Amount of Money made after the Cost of Making the Product have been Taken away from the Revenue
[Variable Costs] |
| What is Net Profit? | -This is simply the Profit the Business has when all the Other Expenses have been Paid Off - Not including the Calculation of Gross Profit
[Fixed Costs] |
| What is the Formula for
-Gross Profit
-Net Profit | -Gross Profit = Sales Revenue - Cost of Sales [VC]
-Net Profit = Gross Profit - Other Operating Expenses and Interest [FC] |
| What is a Ratio Analysis? | -This can show that the Profit made is Accentually good Business Performance or Not
-They simply see how much of the Revenue is turned into Profit, in a Percentage |
| Formula for Gross Profit Margin? | Gross Profit Margin [GPM] = Gross Profit [GP] / Sales Revenue x 100 [For the Percentage] |
| How can you Increase the Sales Revenue? | -Having the Selling Price Lower can lead to more Demand for it, meaning more Sales
-Having the Selling Price Higher can lead to more Revenue, for the Same Variable Costs
-Increasing the Advertising and Knowledge of the Product can Increase the Sales of it, however it will affect the Net Profit as Advertising is Expensive |
| How can you Lower the Cost of Sales [VC] | -Cutting down the Price Paid to Suppliers
-Changing the Suppliers if the New Supplier has Better Deals
-See their Existing Product and try to Produce them Cheaper |
| Formula for Net Profit Margin? | -Net Profit Margin [NPM] = Net Profit [NP] / Sales Revenue x 100 [For a Percentage] |
| How can you Improve the Net Profit Margin? | -Lowering the Selling Price, can Increase the Sales Revenue therefore meaning more Net Profit can be Generated
-Increasing the Selling Price can Increase the Sales Revenue therefore meaning more Net Profit can be Generated
-Delayering the Organisation Structure means less Money to pay Workforce
-Freeze the Recruitment - Stops the Costs for those Processes
-Move to a Cheaper Location |
| Why is the Net Profit Margin better than the Gross Profit Margin, in terms of Performance Analysing? | -This is because it gives a Better Indicator of the Performance of the Business, as it takes in Consideration ALL the Costs to make the Product, and keep the Business running |
| How else can you Analyse Financial Performance? | -You can compare your Profits with:
-Previous Figures
-Targets
-Competitors Performances
-Stakeholders Objectives |
