You must be able to to define 'Gross Profit/Operating Profit' and Profit Margins [Grade E]
You should be able to explain why profit is important to a business [Grade C-B]
You could start to judge how profit can be improved within a business [Grade A]
Learning Activities You need to read through the worksheet that goes through the basics of profit. This is knowledge and it is vital you understand the formulas.
The link to the worksheet is here: Once you have looked over the key terms on the worksheet - in your groups: You need to find some news articles that mention the terms profits/profit margins.
Once you have found a good news article - you need to create a comment with the article and then create 3 exam questions that cover all the learning objectives mentioned above. Use your group members names when commenting.
http://www.guardian.co.uk/media/2012/nov/13/itv-bbc-olympic-coverage
ReplyDelete1. state the formula to find gross profit and net profit.
2. why is the revenue loss of 6% a disadvantage for ITV, and why would they want a higher % of revenue?
3. Discuss what strategies ITV could use to increase their net profit.
http://www.nytimes.com/2012/10/26/technology/apple-profits-rise-24-on-iphone-5-sales.html
ReplyDeleteApple said its operating profit was $8.22 billion, or $8.67 a share, compared with $6.62 billion, or $7.05 a share, a year ago. Revenue for the period rose 27 percent to $35.97 billion for iPhone 5 alone, and revenue for the full fiscal year was $156.5 billion. To put that in perspective, Apple’s revenue for the year exceeded that of Microsoft, Google and Facebook combined.
Analysts surveyed by Thomson Reuters had expected Apple to report earnings of $8.75 a share and revenue of $35.8 billion. The results were well ahead of Apple’s own forecast of $7.65 a share in earnings and $34 billion in revenue for the period.
It was the company’s projections for its current holiday quarter that raised eyebrows among investors. The company forecast earnings of $11.75 a share and revenue of $52 billion for the period, typically its biggest of the year. That implied a gross profit margin of 36 percent, lower than the 40 percent margin Apple reported in the fourth quarter, said Rob Cihra, an analyst at Evercore Partners.
Questions:
1) Using examples from the extract above, define operating profit. (2)
2) Operating profit being 8.22 b and sales revenue being 35.97 b, what would be the operating profit percentage for iPhone 5 alone. (4)
3) Discuss how Apple can begin to increase profit margin from 36% to 42% by the next quarter. (8)
1)Operating profit is the profit earned by the business' normal opertations. Apple recieves $8.22 b every year which is the total of $8.67 of every share.
ReplyDelete2) (8.22 b divided by 35.97 )multiplied by 100 = 2.45 %
3) To be able to increase profit margin , Apple must be able to cut low on costs so that the profit would increase. However Apple has recently said that the products would be more expensive to make and this may prevent Apple from reaching its aim of inreasing profit margin . Therefore Apple could put moe time into market research and developing new ideas and ways to create these products in the cheapest and most efficient way possible. Furthermore Apple must be able to attract customers and increase demand . Apple has started doing this by introducing new products such as ipad mini . By providing new ideas , Apple could increase demand and sales would then increse , eventually increasing profit and allowing Apple to reach its aim of an increase of 8 % in profit margin.
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DeleteOperating Profit = Gross Profit Less Expenses
Delete1) operating pofit is the profit made after expenses are deducted, so: gross profit-expenses. soo for apple their operating profit is $8.22 billion
ReplyDelete2)to determine the operating profit percentage you have to use the formula: (operating profit/expenses) x 100. for apple their percentage would be, (8.22l35.97)x 100= 22.85%. the operating profit percentage tells Apple hoe much operating profit they are making with every dollar made.
3) To increase profit margin Apple can either aim to increase their sales revenue, or decrease their expenses. ways to increase their revenue could be by increasing their advertising, although this will result in some short term costs the overall long term benefits could be worth it, gainig the extra 6% Apple need.Lowering their prices could increase revenue as people are more enclined to buy the products, therefore increasng demand. despite receiving less money per unit, this can still mean profitability has increaed due to the extra customers, so number of units sold increase. Futhermore at the moment Apple are more expensive to the consumer than their rivals, samsung for example. so this is another reason to decrease prices, to increase competitiveness.
Apple can reduce expenses by focusing on their most profitable area, so ipad for example, and decrease investment in the lesser profitable areas. this will free up space and capacity and mean extra focus is on the moneymakers.wage costs could also be cut however this may result in lower motivation and poor productivity with the workers, so this may have an adverse effect as efficiency is less as less units may be produced.
overall i think Apple's best option to increase their profit margin is to reduce their prices as demand and revenue will increase.
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Delete1. net profit = total revenue-total expenses
ReplyDeletegross profit = cost of sales-cost of goods
2.A loss of revenue means the business is making less money.If ITV has less money then they dont have as much money to invest in new shows which could raise their revenue even more. The amount of dividends paid out to ITV's shareholders will be lowered as they are a plc, and growth of the business will be slowed as they do not have as much money to expand.
1. 0 marks. correct:net profit=gross profit-expenses
Delete:gross profit=total revenue-cost of good.
2. 2 marks,only talked about 1 side of the question.
1) Gross profit is total revenue less cost of good.
ReplyDeleteNet profit is gross profit less expenses
2) A 6% loss of revenue is a huge disadvantage for the company (ITV). This means that they generate less money as a result. If they generate less money, they may not be able to break even as a result, resulting in a debt or maybe even having to fire of some workers. Less money would also mean they will not be able re-invest back to the business as much.
ITV would want to have a high revenue, this is because they would need to break even to be making some money. If they would be able to generate high amounts of profit, they could even think about investing the money back on the business to benefit it in the long run.
3) Net profit. Net profit is the amount of money made annually when less all the expenses.
Strategies that could be used may have some advantages and disadvantages on the business itself.
ITV can try to decrease their overall expenses. This could be done by reducing the amount of workers and invest more on machinery. However, initial costs will be much higher as high amounts of investment are needed, though in the long run net profit can increase as a result
One more strategy that could be used is that the business could be decreasing the electricity bills. This could be done by working more efficiently, and using resources dependent on electricity less. However as almost everything is dependent on electricity, this is a very hard strategy as productivity may also be lowered.
Overall, the business would take into account of investing in machinery. Even though the initial cost will be high, the main aim could be achieved over the long run.