2.3 - Managing Finance
2.3.1 – Profi
Profi The surplus money made by a business when revenue exceeds
cosis
Gross profi Profi after cosi of sales has been deducied and before
expenses
Operating profi A frm’s profi after all oiher expenses have been deducied
Profi for ihe year nnei Profi after iax has been deducied bui before ihe paymeni of
profit dividends
Siaiemeni of A formal fnancial documeni ihai summarises a business’
Comprehensive Income irading activities and expenses io show wheiher ihe business
nProfi and Loss has made a profi or a loss
Accounit
Profiabiliiy Profiabiliiy measures ihe efciency of a business in generating
profi
Expenses A collective ierm for all of ihe oiher cosis ni.e. noi included in
cosi of salest incurred by a business as a resuli of irading e.g.
marketing, disiribution, utilities
Gross profi margin A measure of profiabiliiy ihai shows gross profi expressed as
a perceniage of sales revenue
Operating profi margin A measure of a frm’s profiabiliiy ihai looks ai ihe relationship
beiween sales revenue and operating profi, expressed as a
perceniage
Profi for ihe year nnei A measure of profiabiliiy ihai shows a frm’s profi for ihe
profit margin year as a perceniage of sales revenue
Cash Cash is money which exisis in a business ai a poini in time in
ihe form of cash in hand or ai ihe bank, ii is available for
immediaie use
Sales revenue The ioial amouni of money coming inio a business from ihe
sales of a good or service
Cosi of goods sold The direci cosis relating io ihe quantiiy sold in a given period
of time
Gross profi Revenue – cosi of sales
Cosi of sales Opening siock + purchases – closing siock
Operating profi Gross profi - overheads
Nei profi Operating profi – exceptional iiems
Gross profi margin Gross profi/revenue x 100
Operating profi margin Operating profi/revenue x 100
Nei profi margin Nei profi/revenue x 100
Profiabiliiy measures ihe fnancial performance of a business by comparing profis achieved
io a second variable e.g. revenue. There are 3 profiabiliiy ratios n( of revenue kepi as
profit: gross profi margin, operating profi margin, and nei profi margin.
Improving Profi/Profiabiliiy
Sell ihe same quantiiy bui a higher price
2.3.1 – Profi
Profi The surplus money made by a business when revenue exceeds
cosis
Gross profi Profi after cosi of sales has been deducied and before
expenses
Operating profi A frm’s profi after all oiher expenses have been deducied
Profi for ihe year nnei Profi after iax has been deducied bui before ihe paymeni of
profit dividends
Siaiemeni of A formal fnancial documeni ihai summarises a business’
Comprehensive Income irading activities and expenses io show wheiher ihe business
nProfi and Loss has made a profi or a loss
Accounit
Profiabiliiy Profiabiliiy measures ihe efciency of a business in generating
profi
Expenses A collective ierm for all of ihe oiher cosis ni.e. noi included in
cosi of salest incurred by a business as a resuli of irading e.g.
marketing, disiribution, utilities
Gross profi margin A measure of profiabiliiy ihai shows gross profi expressed as
a perceniage of sales revenue
Operating profi margin A measure of a frm’s profiabiliiy ihai looks ai ihe relationship
beiween sales revenue and operating profi, expressed as a
perceniage
Profi for ihe year nnei A measure of profiabiliiy ihai shows a frm’s profi for ihe
profit margin year as a perceniage of sales revenue
Cash Cash is money which exisis in a business ai a poini in time in
ihe form of cash in hand or ai ihe bank, ii is available for
immediaie use
Sales revenue The ioial amouni of money coming inio a business from ihe
sales of a good or service
Cosi of goods sold The direci cosis relating io ihe quantiiy sold in a given period
of time
Gross profi Revenue – cosi of sales
Cosi of sales Opening siock + purchases – closing siock
Operating profi Gross profi - overheads
Nei profi Operating profi – exceptional iiems
Gross profi margin Gross profi/revenue x 100
Operating profi margin Operating profi/revenue x 100
Nei profi margin Nei profi/revenue x 100
Profiabiliiy measures ihe fnancial performance of a business by comparing profis achieved
io a second variable e.g. revenue. There are 3 profiabiliiy ratios n( of revenue kepi as
profit: gross profi margin, operating profi margin, and nei profi margin.
Improving Profi/Profiabiliiy
Sell ihe same quantiiy bui a higher price
