Finance GCSE Business Profit

Flashcards about Finance GCSE Business Profit

Profit

The difference between the total revenue of a business and the total costs of a business, when revenue is greater than cost.

Directors interest in Business Accounts

Security of position, to measure whether past planning has been a success, and to aid decision-making for future.

Worker interest in Business Accounts

To see whether the business is successful, which will impact on job security, also could business afford wage increase.

Managers interest in Business Accounts

To see whether the business is successful, which will impact on job security, also could business afford salary increase, do they qualify for bonus? has their management been effective?

Shareholder/investors interest in Business Accounts

To see whether the business is successful, which may effect value of shares, influencing shareholder wealth, and level of dividend, which adds to shareholder income, decisions on keeping, buying or selling.

Customer interest in Business Accounts

May want to know about survival of business, which will decide whether it is worthwhile being a customer, or should contracts be negotiated elsewhere? also might high profits suggest business charging high prices?

Supplier interest in Business Accounts

Also may want to know about survival of business, to find out whether the business is likely to be able to pay its trade credit.

Bank interest in Business Accounts

May also want to know about survival of business, to find out whether the business is likely to be able to pay its loans/ overdraft.

Government interest in Business Accounts

As customers, to find how much tax will be collected from the business, does it consider profit to be excessive? should more tax be levied?

Competitor interest in Business Accounts

To make comparisons, to aid planning/competitive strategies.

Profit and Loss Accounts

A financial statement showing a business’ sales revenue and costs and thus its profit or loss over a period of time; also called income statements.

Gross Profit

The profit made before expenses have been paid; Calculated as Total Revenue – Costs of Goods Sold.

Gross Profit Margin

The gross profit expressed as a percentage of sales; Calculated using the formula: Gross Profit Margin = (Gross Profit / Sales) × 100

Net Profit Margin

The final profit made by a business after all costs have been paid; Calculated as Gross Profit - Expenses.

Net Profit Margin

The net profit expressed as a percentage of sales; Calculated using the formula Net Profit Margin = (Net Profit / Sales) × 100.

Reasons for changes in the Gross or Net Profit Margin

Sales Revenue, Costs of Goods Sold and Expenses.