Questions on profit and loss

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1. What does the profit of loss account show?
It shows if a business has made a profit or a loss over the last financial year
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2. What does sales revenue mean?
The money coming into the business
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3. What does cost of sale mean?
The cost to make the product
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4. What does gross profit mean?
Sales revenue take the cost of sales
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5. What does overheads/expenses mean?
Bills not to do with making the product such as rent
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6. What does net profit mean?
Money kept inside the business
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7. What does dividends mean?
Money paid to shareholders
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8. What does retained profit mean?
Money kept inside the business
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9. What does the gross profit margin show?
It shows the gross profit per £1 of sales. For example if it is 40% for every £1 of revenue, 40p is gross profit
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10. What does the net profit margin show?
It shows the net profit per £1. For example if it is 20% for every £1 of revenue, 20p is profit.
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11. Jake's jam has a gross profit margin of 70%. The average for the industry is 40%. What does this mean?
Jake's jam is running much more efficiently. It is turning revenue into gross profit much more efficiently.
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12. Clare's cakes has a gross profit margin of 20%. The average for the industry is 50%. What does this mean?
She isn't turning revenue into gross profit as efficiently as other bakeries in the industry.
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13. How do you know if your business has a good profit margin?
•Compare it to the industry average •Look at what profit margin you had last year
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Other cards in this set

Card 2

Front

2. What does sales revenue mean?

Back

The money coming into the business

Card 3

Front

3. What does cost of sale mean?

Back

Preview of the front of card 3

Card 4

Front

4. What does gross profit mean?

Back

Preview of the front of card 4

Card 5

Front

5. What does overheads/expenses mean?

Back

Preview of the front of card 5
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