Revenue Costs Profit and Loss Learning Objectives Understand

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Revenue, Costs, Profit and Loss

Revenue, Costs, Profit and Loss

Learning Objectives • Understand the terms Revenue, Cost and Profit • Be able to

Learning Objectives • Understand the terms Revenue, Cost and Profit • Be able to calculate revenue • Understand why businesses need to make a profit • Appreciate the impact of losses on a business

Setting up a business • Imagine you are setting up a business which sells

Setting up a business • Imagine you are setting up a business which sells and makes jewellery • What money is coming into the business? • Money from selling jewellery • This money coming into the business from selling a product is called SALES REVENUE (sometimes called Sales Turnover)

SALES REVENUE = PRICE PER UNIT X NUMBER SOLD

SALES REVENUE = PRICE PER UNIT X NUMBER SOLD

PROFIT • Is sales revenue the same as profit? • NO • YOU NEED

PROFIT • Is sales revenue the same as profit? • NO • YOU NEED TO TAKE OFF THE COSTS ASSOCIATED WITH SELLING THE JEWELLERY • Like what?

COSTS • Make a list of all of the costs the jewellery business will

COSTS • Make a list of all of the costs the jewellery business will have to pay to run its business

Costs Incurred • Two Types • FIXED COSTS • A cost a business has

Costs Incurred • Two Types • FIXED COSTS • A cost a business has to pay no matter how much it sells or makes • Rent, Machinery, Equipment, Salaries, Insurance,

• VARIABLE COSTS • Costs which vary depending on the number of items

• VARIABLE COSTS • Costs which vary depending on the number of items sold or made • Raw materials (stock), wages, energy bills

• Fixed Costs = A set amount • Variable Costs = Usually shown

• Fixed Costs = A set amount • Variable Costs = Usually shown per unit TOTAL VARIABLE COSTS = VARIABLE COST PER UNIT X NUMBER SOLD

TOTAL COSTS = TOTAL FIXED COSTS + TOTAL VARIABLE COSTS

TOTAL COSTS = TOTAL FIXED COSTS + TOTAL VARIABLE COSTS

Activity • Categorise the costs you identified for the business into whether they are

Activity • Categorise the costs you identified for the business into whether they are fixed or variable FIXED COSTS VARIABLE COSTS

PROFIT When a businesses revenues are more than their costs

PROFIT When a businesses revenues are more than their costs

PROFIT/LOSS = SALES REVENUE – TOTAL COSTS Money coming into the business from selling

PROFIT/LOSS = SALES REVENUE – TOTAL COSTS Money coming into the business from selling the jewellery All the costs involved in making and selling the jewellery

GROSS PROFIT = Sales Revenue – Cost of Sales • Costs of sales are

GROSS PROFIT = Sales Revenue – Cost of Sales • Costs of sales are the physical costs of producing and selling the product or service • Stock/raw materials NET PROFIT = Gross Profit – Other Operating Costs • Other operating costs are all other fixed & variable costs

Why make a Profit? Write the correct reasons in your book To survive To

Why make a Profit? Write the correct reasons in your book To survive To pay employees wages To expand the business To attract investment To reinvest in the business To pay a shareholder dividend To make employees happy To pay for advertising

LOSSES If total costs are greater than total revenue the business will make a

LOSSES If total costs are greater than total revenue the business will make a loss

How do you deal with a loss? Ways of dealing with a loss.

How do you deal with a loss? Ways of dealing with a loss.

In your books… • Copy the table below and identify the impact of achieving

In your books… • Copy the table below and identify the impact of achieving a profit and a loss on the business and the owner Owner Business Profit Loss

Costs Variable costs costs of Fixed costs costsCosts Variable costs costs of Fixed costs costs
Profit And Loss What is Profit and LossProfit And Loss What is Profit and Loss
PROFIT AND LOSS ACCOUNT REVENUE RECOGNITION Revenue isPROFIT AND LOSS ACCOUNT REVENUE RECOGNITION Revenue is
Profit Loss Statement Profit Loss Statement A basicProfit Loss Statement Profit Loss Statement A basic
Lesson 4 REVENUE PROFIT MAXIMISATION LOSS MINIMISATION REVENUELesson 4 REVENUE PROFIT MAXIMISATION LOSS MINIMISATION REVENUE
Background to Supply Costs Revenue and Profit CostsBackground to Supply Costs Revenue and Profit Costs
PROFIT Lesson Objectives Distinguish between costs revenue andPROFIT Lesson Objectives Distinguish between costs revenue and
Profit Teorije o profitu Raunovodstveni profit Ekonomski profitProfit Teorije o profitu Raunovodstveni profit Ekonomski profit
Profit Chain PROFIT CHAIN INNOVATION MANAGEMENT Profit ChainProfit Chain PROFIT CHAIN INNOVATION MANAGEMENT Profit Chain
The profit and loss account The profit andThe profit and loss account The profit and
Profit and Loss 1 Concepts in Profit andProfit and Loss 1 Concepts in Profit and
Profit and loss Net profit Explain the netProfit and loss Net profit Explain the net
2 4 Profit Profit and Loss Many businesses2 4 Profit Profit and Loss Many businesses
Revenue and Profit Maximization Revenue Optimization Exercise ThisRevenue and Profit Maximization Revenue Optimization Exercise This
FINANCIAL REPORT Profit Loss Profit by the endFINANCIAL REPORT Profit Loss Profit by the end
Financial Profit Loss KPI Dashboard Gross Profit MarginFinancial Profit Loss KPI Dashboard Gross Profit Margin
5 2 1 COSTS REVENUE AND PROFIT IB5 2 1 COSTS REVENUE AND PROFIT IB