Nothing Special   »   [go: up one dir, main page]
Scribd Logo
Upload

Welcome to Scribd!

  • 425 views

    Computation of Gross Profit

    Uploaded by

    MariaAngelaAdanEvangelista
    This document discusses computing gross profit, operating profit, and net profit. It defines gross profit as revenue minus cost of goods sold and gross profit rate as gross profit divided by revenue. Operating profit is defined as gross profit minus operating expenses, and net profit as operating profit minus other expenses and taxes. The document provides an example of computing gross profit for a perfume retailer and discusses profitability ratios and their importance for business performance analysis.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Computation of Gross Profit

    Uploaded by

    MariaAngelaAdanEvangelista
    425 views21 pages
    This document discusses computing gross profit, operating profit, and net profit. It defines gross profit as revenue minus cost of goods sold and gross profit rate as gross profit divided by revenue. Operating profit is defined as gross profit minus operating expenses, and net profit as operating profit minus other expenses and taxes. The document provides an example of computing gross profit for a perfume retailer and discusses profitability ratios and their importance for business performance analysis.

    Original Description:

    Entrepreneurship Module 8

    Original Title

    M8

    Copyright

    © © All Rights Reserved

    Available Formats

    PPTX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    This document discusses computing gross profit, operating profit, and net profit. It defines gross profit as revenue minus cost of goods sold and gross profit rate as gross profit divided by revenue. Operating profit is defined as gross profit minus operating expenses, and net profit as operating profit minus other expenses and taxes. The document provides an example of computing gross profit for a perfume retailer and discusses profitability ratios and their importance for business performance analysis.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    425 views21 pages

    Computation of Gross Profit

    Uploaded by

    MariaAngelaAdanEvangelista
    This document discusses computing gross profit, operating profit, and net profit. It defines gross profit as revenue minus cost of goods sold and gross profit rate as gross profit divided by revenue. Operating profit is defined as gross profit minus operating expenses, and net profit as operating profit minus other expenses and taxes. The document provides an example of computing gross profit for a perfume retailer and discusses profitability ratios and their importance for business performance analysis.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 21

    MODULE 8

    COMPUTATION OF GROSS PROFIT


    LEARNING OBJECTIVES

    • Identify essential components in computing revenues


    and costs;
    • Differentiate between gross profit, operating profit and
    net profit;
    • Interpret financial ratios such as the gross profit rate,
    operating profit margin and net profit margin;
    • Compute actual revenues;
    • Compute actual costs;
    • Compute gross profit, operating profit and net profit;
    LEARNING OBJECTIVES

    • Compute the gross profit rate, operating profit margin


    and net profit margin;
    • Create profit schedules and reports;
    • Appreciate the importance of keeping track with the
    performance of one’s business through the correct and
    honest computation and reporting of business profit; and
    • Appreciate the importance of the correct computation
    and interpretation of financial ratios gross profit rate,
    operating profit margin and net profit margin.
    ACTIVITY 1

    • Rodrigo is engaged in a buy – and – sell


    business of perfumes. He bought 10 boxes
    of perfumes. Each box costs P12,000.00
    and contains a dozen of perfume bottles.
    He is planning to sell one perfume bottle at
    P1,500. What is his expected profit on the
    10 boxes of perfumes?
    ACTIVITY 1

    • The ultimate goal of any business whether


    a retail or wholesale is to earn a profit.
    Getting the difference between the
    amount of money earned from the selling
    10 boxes containing a dozen of perfume
    bottles and the cost of those 10 boxes
    gives the profit.
    ACTIVITY 1

    1. How much profit does Rodrigo earn?


    2. Is it good to engage in a business like
    Rodrigo’s? Yes or No?
    3. What do you think of Rodrigo’s
    business? Is it good for a beginner?
    COMPUTING THE GROSS PROFIT

    The profitability ratios are a group of financial statements


    that primarily determine the profitability of the business
    operation.

    The gross profit rate on a product is computed as:

    Net Sales xxxxxxx


    Less: Cost of Sales xxxxxxx
    Gross Profit xxxxxxx
    • Profit is the gross income. The
    amount of gross profit
    provides information to the
    entrepreneur about revenue
    earned from sales.
    • The term cost refers to the
    purchase price of the product
    including the total outlay
    required in producing it
    THE GROSS PROFIT MARGIN IS COMPUTED
    AS FOLLOWS
    OPERATING PROFIT MARGIN

    The operating profit margin is the excess


    of gross profit from operating expenses.
    Gross Profit xxxxx
    Less: Operating Expenses xxxxx
    Operating Profit Margin xxxxx
    OPERATING PROFIT MARGIN

    • operating profit margin is the second


    level of revenue in the income
    statement. At this stage, not only is
    the cost of buying or making the
    product that has been deducted is
    included but also the operating
    expenses.
    Net Profit Margin Rate
    Operating Profit Margin
    Add: Interest Income
    Total
    Less: Interest Expense
    Income Tax
    Net Profit margin
    ANALYZING THE LIQUIDITY STATUS OF THE
    BUSINESS

    • Liquidity Ratios
    • Current Ratio = Current assets / Current
    Liabilities
    • Quick Ratio = (Current Assets – Inventories) /
    Current Liabilities
    • Current liabilities= (Cash and Equivalents +
    Marketable Securities + Accounts Receivable)
    QUICK RATIO
    • measures its short-term
    obligations with its most
    liquid assets and therefore
    excludes inventories from its
    current assets.
    • Financial statements are important in a
    company management as a means of
    communicating past successes as well as
    future expectations. The financial
    statement records all the operating results
    such as sales, expenses and profits or
    losses.
    • The Return of investment
    (ROI) measures the amount
    of net income per peso
    invested to the business.
    • The average total asset is
    calculated by dividing the sum
    of the total assets at the
    beginning and end of the
    period.

    You might also like