2011-12-14 15:46:08 sky
Accountants and auditors look at many different types of numbers to record the success or failure of a company but the two most important things are whether the company makes a profit or loss.
There are two main types of profit: Gross profit and net profit.
Gross profit is a simple calculation of income minus the cost of the goods of services sold.
Net profit is income (also called revenue) less all of the company expenses. Net profit is the most important figure for working out if a company is healthy or not.
The opposite of a profit is a loss. If a company spends more than it makes, you can say that it has made a loss.
Before investing in a company or buying share in a company listed on a stock exchange, it is vital that you find out about the company’s operations. Take care to look at the gross and net profit figures for at least the last three years. A net profit margin of at least 10 percent is considered good.
Beth: Sally, do you have some batteries that I can borrow?
Sally: Sure, why do you need them?
Beth: I need my calculator to work out the profit from last month.
Sally: It is very important that you don’t make mistakes when you are calculating those numbers so, take my calculator.
Beth: Thanks Sally. The senior managers need the results from last month straight away, so I can’t stop to talk.
Sally: See you later Beth.
Sally: I will bring your calculator back as soon as I have finished with it.
Beth: No problem, just make sure the profits are right!
Sally: Don’t worry so much - worrying is my job!