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Measuring and Increasing Profit. AS Business Studies. Aims & Objectives. Aim: Understand ways of increasing profits. Objectives: Explain gross profit, net profit & ROCE Evaluate methods of increasing profitability. Starter. What is the formula for calculating: Net profit margin
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Measuring and Increasing Profit AS Business Studies
Aims & Objectives Aim: • Understand ways of increasing profits. Objectives: • Explain gross profit, net profit & ROCE • Evaluate methods of increasing profitability
Starter • What is the formula for calculating: • Net profit margin • Gross profit margin • ROCE • Explain what a net profit margin of 37% means • Explain what a ROCE of 28% means.
Carousel Activity Methods of Increasing Profits • Increase sales without reducing Net Profit Margin • Increase Net Profit Margin by reducing variable costs • Increase net profit margin by increasing price • Increase net profit margin by reducing fixed costs Limitations of Each Method – may wish to consider methods!
Increase Net Profit Margin by Increasing Price Increase Net Profit Margin by Reducing Fixed Costs
Tesco & Sainsbury’s • Case Study
Case Study • Explain the term net profit margin • Calculate the NPM for both companies for 2006 & 2007. • Give two possible actions Sainsbury’s managers could take to improve profitability. What limitations may exist for the methods you have suggested?
Exam Practice • Net profit margin question 1 June 2011 (3 Marks) • Net profit margin question January 2010 question 2a (6 Marks) • Net profit margin question June 2009 question 1a (4 Marks)