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what does a p&L do?
calculates the profit that the business makes in a year
what is net profit?
money made by the business after all the expenses have been paid
what is the importance of a P&L?
- >shows how much they can afford to pay out as dividends
- >shows if expenses are too high
- >shows if price for materials is too high... low net profilt
- >shows if prices are low.. low gross profit
what does a balance sheet do?
show the business's financial position
what is the importance of a balance sheet?
- >shows if there's enough security for bank loan.. fixed assets
- >shows if have enough cash available to pay bills... working capital figure
- >if the business is able to take out any more loans... financed by
what does the profitability ratio do?
examines whether the porfit made by the business id good or bad for the size of the business
what are the three profitabiltiy ratios?
- >gross profit percentage/gross margin
- >net profit %/net margin
- >return on investment/captial employed
formula for gross profit %
(gross profit ÷ sales) x100
what does decreasing G.P% mean? how can it be fixed?
- >selling price is falling
- >cost price in increasing
increase selling price or buy from cheaper supplier
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