Do Now Task...Answer Questions 1 & 2 - Under last lessons title - Show your workings
Sales Revenue - Cost of Sales = Gross Profit
£2,000,000 - Cost of Sales = £1,100,000
£2,000,000 - £1,100,000 =
£900,000
£2,000,000 - £900,000 = Gross Profit of
£1,100,000
Sales Revenue - Cost of Sales = Gross Profit
£625,000 - £145,000 = Gross Profit
Gross Profit = £480,000
What is the Net Profit?
1.
2.
To Start...
Using the information below, calculate the
Net Profit for the business.
You are advised to show your workings (2 Marks)
HINT
Start by writing down the formula you should use
Net Profit = Gross Profit - Operating Costs
(indirect costs)
Using the information below, calculate the
Net Profit for the business.
You are advised to show your workings (2 Marks)
£20,000
+£400,000
+£320,000
£1,200,000 - £740,000 = £460,000
To Start...
In this lesson...
How does a business use their Gross Profit and
Net Profit calculations to measure its performance?
Title: Gross Profit and Net Profit
Calculate the Total Revenue and Gross Profit for 2019 - What can you tell?
March 31st 2018
March 31st 2019
Sales Revenue £ | |
Sales of celebration cakes | 9, 507 |
Sales of cakes sold in store | 7, 145 |
Total revenue | 16, 652 |
Expenses | |
Cost of sales: e.g Raw Materials | 5125 |
Gross Profit | 11, 527 |
?
?
Sales Revenue £ | |
Sales of celebration cakes | 8,979 |
Sales of cakes sold in store | 7, 424 |
Total revenue | 16, 403 |
Expenses | |
Cost of sales: e.g Raw Materials | 3,218 |
Gross Profit | 13,185 |
Measuring Performance from Gross Profit:
This comparison shows how well a business is at controlling its cost of sales.
In this example it is clear that the business has increased their sales slightly, however, it is less efficient in the purchase of its raw materials/goods purchasing in 2019 than it was in 2018.
March 31st 2018
March 31st 2019
Title: Gross Profit and Net Profit
Sales Revenue £ | |
Sales of celebration cakes | 9, 507 |
Sales of cakes sold in store | 7, 145 |
Total revenue | 16, 652 |
Expenses | |
Cost of sales: e.g Raw Materials | 5125 |
Gross Profit | 11, 527 |
Sales Revenue £ | |
Sales of celebration cakes | 8,979 |
Sales of cakes sold in store | 7, 424 |
Total revenue | 16, 403 |
Expenses | |
Cost of sales: e.g Raw Materials | 3,218 |
Gross Profit | 13,185 |
Net Profit = Gross Profit - Other operating expenses
After a slightly worse Gross Profit in 2019, how do the Net Profits compare?
March 31st 2018
March 31st 2019
Gross Profit | 13, 185 |
Operating Costs: | |
Interest on bank loan | 240 |
Rent | 1620 |
Salaries | 2400 |
Equipment | 3317 |
Utilities | 743 |
Total Operating expenses | 8, 320 |
Net profit/loss | 4, 865 |
Gross Profit | 11, 527 |
Operating Costs: | |
Interest on bank loan | 240 |
Rent | 3220 |
Salaries | 5400 |
Equipment | 3950 |
Utilities | 2100 |
Total Operating expenses | 14,910 |
Net profit/loss | (3, 383) |
?
?
Title: Gross Profit and Net Profit
Why do you think this is? What should they try and do next year?
Using profit as a measure of performance
Measuring Performance from Net Profit:
Net profit is considered the most important measure of profitability as it is what is actually left over once all expenses are taken away.
The calculation and comparison between different years then lets the business understand how well expenses and the running of the business has been managed.
Q...What could a business then do with this Net Profit that makes it such an important amount for them?
Return to the owners - Give to shareholders (if Ltd or PLC) - Reinvest back into the business (retained profit)
Sales Revenue £ | |
Sales of Celebration cakes | 8,979 |
Sales of cakes sold in store | 7,424 |
Total revenue | 16,403 |
Cost of sales: e.g Raw Materials | 3,218 |
Gross Profit | 13,185 |
Other Operating Costs/Expenses: | |
Interest on bank loan | 240 |
Rent | 1620 |
Salaries | 2400 |
Equipment | 3317 |
Utilities | 743 |
Total operating expenses | 8,320 |
Net profit/loss | 4,865 |
Add up the revenue
Gross Profit = Sales Revenue - Cost Of Sales
Add up the Operating Expenses (indirect costs)
Net Profit =
Gross Profit - Operating costs
(indirect costs)
Gross Profit
& Net Profit
Complete Gross Profit and Net Profit questions from last lesson if you did not finish them
THEN
Move on to 2nd set of questions which are set on Google Classroom
Let me know once you have finished these…
2. Scroll to “Calculation/Formula Practice and then “Theme Two
Calculation Practice”
3. Go through and attempt questions: 2, 4, 5, 6, 8 and 9 in your books.
Write the formulas first and then show ALL your calculations.
Note: Don’t look at the answers at the bottom…there is NO point in doing this!!!
Would it help you to revise revise with Flashcards using the Leitner Method?
Revision Technique: