Business · Topic 2: Building a business
Making financial decisions
How to calculate gross and net profit, profit margins and the average rate of return, and how to use financial and other data - and know its limits - to understand performance and make decisions.
Lessons
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1
Business calculations
Gross profit shows what a business earns from selling its products; net profit shows what is left after every cost. Turning each into a percentage of revenue -…
8 terms -
2
Understanding business performance
The average rate of return tells a business whether an investment is worth making. Graphs, financial data, market data and marketing data help it understand…
7 terms
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- Business calculations.pptx Built from the lesson script on 28 September 2026. View
- Business calculations - Completed Notes.docx The full notes for the lesson, to revise from. Built from the lesson script on 28 September 2026. View
- Business calculations - Exam Questions.docx Built from the lesson script on 28 September 2026. View
- Understanding business performance.pptx Built from the lesson script on 28 September 2026. View
- Understanding business performance - Completed Notes.docx The full notes for the lesson, to revise from. Built from the lesson script on 28 September 2026. View
- Understanding business performance - Exam Questions.docx Built from the lesson script on 28 September 2026. View
Key terms in this chapter
All 15, gathered from every lesson.
- Sales revenue
- The money received from selling products.
- Cost of sales
- The direct cost of making or buying the products sold.
- Gross profit
- Sales revenue minus cost of sales.
- Other operating expenses
- Costs of running the business not included in cost of sales, such as rent and salaries.
- Net profit
- Gross profit minus other operating expenses and interest.
- Gross profit margin
- Gross profit as a percentage of sales revenue.
- Net profit margin
- Net profit as a percentage of sales revenue.
- Income statement
- A financial statement showing a business's revenue, costs and profit over a period.
- Investment
- Spending money now in the hope of earning more in the future.
- Average rate of return (ARR)
- Average annual profit from an investment as a percentage of its cost.
- Financial data
- Information about a business's revenue, costs, profit and cash.
- Market data
- Information about the market, such as its size, growth and market share.
- Marketing data
- Information about the results of a business's marketing, such as sales and customer feedback.
- Quantitative data
- Data in the form of numbers.
- Qualitative data
- Data about opinions, feelings and reasons.