Analysing Profitability (AQA A-Level Business): Flashcards
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Practise the cards
10 cards from this deck
Why profit figures alone have limited value
Why profit figures alone have limited value
Can't compare fairly - need context or ratios for analysis
Gross profit margin formula
Gross profit margin formula
(Gross profit ÷ sales revenue) × 100
What gross profit margin shows
What gross profit margin shows
% of revenue left after paying direct costs of production
Operating profit margin formula
Operating profit margin formula
(Operating profit ÷ sales revenue) × 100
Why operating profit margin is most important
Why operating profit margin is most important
Shows how efficiently business operates overall
Profit for the year margin formula
Profit for the year margin formula
(Profit for the year ÷ sales revenue) × 100
Common pattern in all profit margin formulas
Common pattern in all profit margin formulas
(Profit ÷ sales revenue) × 100
What falling gross profit margin suggests
What falling gross profit margin suggests
Rising direct costs, increased competition, or inefficient production
What falling operating profit margin suggests
What falling operating profit margin suggests
Rising indirect costs (expenses) like rent, marketing, admin
What higher profit margins indicate
What higher profit margins indicate
Better performance - business keeps more profit from each sale