2.3 Managing finance

Define gross profit

Difference between revenue and costs directly related to production

Define operating profit

Difference between gross profit and indirect expenses involved in operating

Define net profit

Difference between operating profit and any interest paid and received

Define the Statement of Comprehensive Income

A financial statement at the end of the year showing all income and expenses over the past 12 months

Define a profit margin

The amount by which sales revenue exceeds costs

Define gross profit margin

Shows proportion of revenue that turns into gross profit

Define operating profit margin

Shows proportion of revenue turned into operating profit

Define net profit margin

The proportion of revenue turned into net profit before tax

Define profit

The difference between revenue and costs

Define cash

The full range of money flowing in and out of the business

Define the statement of financial position (balance sheet)

Contains information required to conclude about the liquidity of a business

Define liquidity

Ability of a business to meet short term commitments with its available assets

Define asssets

Things owned by the business which can generate finance

Define liabilities

A debt that has to be repaid