Profit (or Loss) Learning Outcomes To be able to calculate profit (E) To be able to identify the impact profit or loss can have on a business (C) To be able to analyse the factors that influence the level of profit/loss made by a business (A)

We have two different types of profit, lets find out the difference! Gross Vs NetGross Vs Net

Profit or Loss Profit or Loss is the difference between how much money a business has made and how much they have spent. Total Revenue – Total cost = Profit OR Loss e.g. a business has revenue of £100 and spends £80 they have a profit of: £20 A business revenue is £180 and costs are £190 (£10) A business makes £200 and costs are £150 £50 A businesses sales turnover is £500 and costs are £350 £150 Manchester City FC: Income £175 million; Wage costs £195 million (£20 million)

The Impact of Profit Occurs when revenue of a business are greater than the costs over a period of time. Businesses that make profit can survive Profit can help a business decide if they should expand Large profits give businesses money for improvements or investments

The Impact of Loss Occurs when revenue of a business are less than the costs over a period of time. The business would need to reduce costs (change products/suppliers) Loss means the business has to change If continuous loss, the business might be forced to close

Gross profit Profit can fall into different categories. Gross profit is the amount of profit made by a business as a result of buying and selling goods or services BUT without paying for any of the day-to-day or other expenses of the business. Gross profit = Sales revenue – Cost of Sales For example if you paid 25p for a chocolate bar and sold them for 40p you would make a gross profit of 15p per chocolate bar

Activity Can you calculate the gross profit using the following examples. a)Weekly sales revenue from CD sales is £ The cost of buying the CDs is £8000. £7,000 b)Daily sales of Mars bars at the newsagents are worth £75. The cost to the newsagent is £ £30.50 c)A bus driver sells 50 single tickets each morning for 80p. The estimated cost of the single journey is £27. £13 d)The school canteen sells 200 drinks at 45p each after receiving them for 28p each. £34 e)Last term CCS stationary sold 40 calculators for £5. The cost of each calculator was £3.85. £46

Net Profit Net profit takes into account the costs involved in running the business, for example, wages, phone bills, rent etc. Net profit can be calculated using the following formula: Net profit = Gross profit – Expenses

Net Profit Activity Filling in the gaps on the sheet provided, can you now calculate the net profit for the five examples?

Answers!! a)£2,500 b)£10,500 c)£2,100 d)£3,040 e)£2,615 Now in tables can you identify factors that will influence how much profit a business will make?

What affects the amount of profit or loss a business makes? The type and size of business The objectives of the business The demand of the product The price consumers are willing to pay The way in which the business controls its costs The profit margin or mark up The amount of competition The cost of setting up a business

Question Do all businesses aim to make a profit? Why/why not? Why is profit important to most businesses? What can a business do with its profits? ACTIVITY Complete the profit and loss worksheet.

Review of Learning 1.What is the formula to work out: Gross profit? Net profit? 2.What is gross profit if Sales revenue = £22,350 and Cost of sales = £14,900 3.What is net profit if Revenue = £250, Operating costs = £980? 4.What are the uses of the profit and loss account? 5.Describe 3 factors that can cause a change in the expected level of profit.