Business 2.3.1 - Calculating Gross, Operating and Net profit + Statement of comprehensive income

Profit is the difference between revenue and all the costs involved in generating that revenue. It is the factor that enables the business to grow.

Each type of profit is calculated after allowing for different types of costs. Useful because:

• It helps to identify when things go wrong (or right)

Gross Profit = Revenue - Cost of Sales

Operating profit = Gross profit - Fixed Overheads

Profit of the year (Net profit) = Operating profit - Financing and Tax

Worked Examples:

• Business sells 5500 units one month, the price charged was $6.70 per unit, cost of sales was $21000. Calculate gross profit.

5500*6.70 = 36850 (Revenue calculation)

36850-21000 = 15850…