How is the cost of sales calculated?

Opening inventory + Purchases - Closing Inventory

Opening inventory - Purchases + Closing Inventory

Opening inventory - Purchases - Closing Inventory

What does the Gross Profit Margin (GPM) measure?

The relationship between sales revenue and gross profit, expressed as a percentage.

The relationship between sales revenue and net profit, expressed as a percentage.

The relationship between sales revenue and operating expenses, expressed as a percentage.

The relationship between sales revenue and total expenses, expressed as a percentage.

How is the Gross Profit Margin (GPM) calculated?

Gross Profit / Sales Turnover X 100

Net Profit / Sales Turnover X 100

Operating Profit / Sales Turnover X 100

Total Revenue / Sales Turnover X 100

What does a GPM of 70% indicate?

For every £100 in revenue, the company makes £70 in gross profit.

For every £100 in revenue, the company makes £70 in net profit.

For every £100 in revenue, the company makes £70 in operating profit.

For every £100 in revenue, the company makes £70 in total profit.

What does the Gross Profit Margin (GPM) allow for comparison to?

Industry, previous years, and provides an overview of how efficiently cost of sales is controlled.

Industry, previous years, and provides an overview of how efficiently total expenses are controlled.

Industry, previous years, and provides an overview of how efficiently net profit is controlled.

Industry, previous years, and provides an overview of how efficiently operating profit is controlled.

What is required for a business to calculate the gross profit margin for each individual product?

The business must differentiate the direct costs of producing each product from the others.

The business must have a high sales volume.

The business must have a low cost of goods sold.

The business must have a high net profit margin.

What does the cost of goods sold on a company's income statement account for?

The direct costs of producing their products

The indirect costs of running the business

The total revenue generated by the company

What are direct costs specifically tied to?

A cost object, which may be a product, department, or project

What do direct costs change with?

The quantity of the product produced

The quality of the product produced

The price of the product produced

The demand for the product produced

What does direct labour include?

The work done by workers on a particular product

The work done by workers on multiple products

What does a higher %GPM indicate about a company?

The company is producing products efficiently.

The company is producing products inefficiently.

The company has a poor pricing structure.

What can a lower GPM indicate about a company's production process?

Lower efficiency in the production process.

Higher efficiency in the production process.

What is the formula for calculating operating profit?

Operating profit = Gross Profit - Expenses

Operating profit = Gross Profit + Expenses

Operating profit = Sales Revenue - Expenses

Operating profit = Net Profit - Expenses

What does operating profit provide an analysis of?

Sales Revenue in comparison to cost of sales, expenses, and gross profit

Net Profit in comparison to cost of sales, expenses, and gross profit

Gross Profit in comparison to net profit and expenses

Sales Revenue in comparison to net profit and expenses

What does the operating profit margin (OPM) measure?

The relationship between sales revenue and operating profit, expressed as a percentage.

The relationship between sales revenue and net profit, expressed as a percentage.

The relationship between sales revenue and gross profit, expressed as a percentage.

The relationship between sales revenue and total expenses, expressed as a percentage.

How is the operating profit margin (OPM) calculated?

Operating Profit / Sales Turnover X 100

Sales Turnover / Operating Profit X 100

Operating Profit / Gross Profit X 100

Gross Profit / Sales Turnover X 100

What does a 50% operating profit margin (OPM) indicate?

For every £100 in revenue, the company makes £50 in operating profit.

For every £100 in revenue, the company makes £50 in net profit.

For every £100 in revenue, the company makes £50 in gross profit.

For every £100 in revenue, the company makes £50 in total profit.

What is one of the benefits of calculating the operating profit margin (OPM)?

It allows for comparison to industry standards and previous years.

It helps in determining the total revenue of the company.

It provides an overview of the company's net profit.

It helps in calculating the company's total expenses.

What does OPM stand for in business terminology?

Operational Performance Measure

What does OPM help investors understand about a business?

The total revenue of the business

The total expenses of the business

The market share of the business

What does an increasing operating margin over a period of time indicate?

A company whose profitability is improving

A company whose profitability is declining

A company whose revenue is decreasing

A company whose expenses are increasing

What does OPM indicate in a business context?

The quality of management and risk level

The overall profit margin of a company

The number of employees in a company

What does OPM show the proportion of revenue available to cover?

Non-operating costs like paying interest/loans/equity

Which of the following can improve operating margin?

Better management controls, more efficient use of resources, improved pricing, and more effective marketing

Increasing the number of employees

How is PFTY calculated?

Operating profit minus finance costs/income and exceptional items costs/income

Revenue minus operating profit and finance costs

Sales revenue minus all costs and expenses

Operating profit plus finance costs/income and exceptional items costs/income

Business Profitability Quiz

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Business Profitability Quiz

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What does profitability refer to in a business context?

How is profitability different from profit?

Which of the following statements is true?

What is profit not equivalent to?

What is the Gross Profit for the period ending 31.5.18?

How is the Gross Profit Margin calculated?

What is the Operating Profit for the period ending 31.5.18?

What is the formula for calculating the Operating Profit Margin?

What is the Profit for the Year for the period ending 31.5.18?

What is the Profit for the Year Margin?

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