Profit margins Finances
Gross Profit = difference between sales revenue Method: Why? Will it work? Why not?
and the cost of sales. Depends on
High sales
elasticity of Competitors.
revenue,
Operating Profit = difference between the gross demand. Marketing efforts
Increase Better use of
profit and the overheads of a business. Sales value may may fail
quantity production
fall (advertising,
sold capacity.
Net Profit = difference between operating profit Business promotional
Higher market
and interest. capacity is campaign, etc).
share.
integral.
Profit margin = ratio of profit compared to sales High sales
Depends on
revenue. revenue, Competitors
price elasticity
Customers may likely to
of demand.
Gross profit margin (GPM) = how much gross Increase perceive product respond.
Sales value may
profit is made for every £1 sale. price as high quality. Customers may
fall
Operating profit margin (OPM) = how much No need for extra switch to
Customer loyalty
operating profit is made for every £1 sale. production competitors.
is key.
capacity.
Net profit margin (NPM) = how much net profit
Low input costs
is made for every £1 sale. Increases value
Persuade = low quality
Reduce per unit sold.
suppliers to offer which = high
Gross Profit = sales revenue – cost of sales variable Higher profit,
better prices. wastage.
costs Unnoticeable
Quality control. Decrease in
Operating Profit = gross profit - other operating price change
quality.
expenses
Demand may
Greater quantity
Net Profit = operating profit - interest Extra outputs not be there.
Increase of sales.
must be sold. Fixed costs may
producti Maximises share
Gross Profit Margin (gp) (%) = (gp / sales revenue) x Business rise.
on of market
100 capacity is Production
output demand. Spreads
integral. quality
fixed costs
Operating Profit Margin (%) = (operating profit / compromised.
sales revenue) x 100 Cut costs
doesn’t affect
Higher profits. May reduce
Net Profit Margin (%) = (net profit / sales revenue) x quality,
Reduce Reduces break ability for
customer
fixed even output. business to
service, or
Gross Profit = difference between sales revenue Method: Why? Will it work? Why not?
and the cost of sales. Depends on
High sales
elasticity of Competitors.
revenue,
Operating Profit = difference between the gross demand. Marketing efforts
Increase Better use of
profit and the overheads of a business. Sales value may may fail
quantity production
fall (advertising,
sold capacity.
Net Profit = difference between operating profit Business promotional
Higher market
and interest. capacity is campaign, etc).
share.
integral.
Profit margin = ratio of profit compared to sales High sales
Depends on
revenue. revenue, Competitors
price elasticity
Customers may likely to
of demand.
Gross profit margin (GPM) = how much gross Increase perceive product respond.
Sales value may
profit is made for every £1 sale. price as high quality. Customers may
fall
Operating profit margin (OPM) = how much No need for extra switch to
Customer loyalty
operating profit is made for every £1 sale. production competitors.
is key.
capacity.
Net profit margin (NPM) = how much net profit
Low input costs
is made for every £1 sale. Increases value
Persuade = low quality
Reduce per unit sold.
suppliers to offer which = high
Gross Profit = sales revenue – cost of sales variable Higher profit,
better prices. wastage.
costs Unnoticeable
Quality control. Decrease in
Operating Profit = gross profit - other operating price change
quality.
expenses
Demand may
Greater quantity
Net Profit = operating profit - interest Extra outputs not be there.
Increase of sales.
must be sold. Fixed costs may
producti Maximises share
Gross Profit Margin (gp) (%) = (gp / sales revenue) x Business rise.
on of market
100 capacity is Production
output demand. Spreads
integral. quality
fixed costs
Operating Profit Margin (%) = (operating profit / compromised.
sales revenue) x 100 Cut costs
doesn’t affect
Higher profits. May reduce
Net Profit Margin (%) = (net profit / sales revenue) x quality,
Reduce Reduces break ability for
customer
fixed even output. business to
service, or
