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profit - Coggle Diagram
profit
WAYS TO IMPROVE PROFIT
increase revenue
reduce costs
do a combo of both
BUT both choices involve a trade off
increase rev = spend more on ads = increases costs
reduce costs = sacrifices on quality = damage rev
DIFFERENT TYPES OF PROFIT
gross profit
total revenue - cost of sales
cost of sales = costs from making a product
operating profit
gross profit - fixed overheads
fixed overheads = costs that have to be paid no matter how well business is peforming
net profit
operating profit - (net financing cost + fixed overheads)
net finance cost = income from interest on bank deposits minus interest chargers from overheads and loans
MEASURING PROFITABILITY
gross profit margin
gross profit/sales rev x100
operating profit margin
operating profit/sales rev x100
net profit margin
net profit/sales rev x100
STATEMENT OF COMPREHENSIVE INCOME
doc produced by public limited companies that show revenues, a breakdown of diff types of costs and different types of profit for a year
comparing with diff years allows judgements about performance of business to be made for current year
CASH VS PROFIT
sales rev doesn't = cash inflow
eg business offers credit to customers and receives credit from suppliers
sales rev recorded when product changes hands so selling on 60 days credit gerjneates sales rev but won't have cash inflow for 60 days
buys materials on credit the cost is incurred when materials are delivered but no cash flows out until suppliers saccutally paid (30 days later)
costs don't = cash outflows
IMPROVING PROFITABILITY
increase selling price
increase profit margin but will decrease overall profit as increase price = fall in sales volume
cut costs
cheaper materials or fewer staff = damage rep = damage rev
PROFIT
the difference between revenue of a business and the coats generated by the business dura g a period of time