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Measuring and Increasing Profit

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

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  1. Measuring and Increasing Profit AS Business Studies

  2. Aims & Objectives Aim: • Understand ways of increasing profits. Objectives: • Explain gross profit, net profit & ROCE • Evaluate methods of increasing profitability

  3. 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.

  4. 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!

  5. Increase Sales Without Reducing NPM

  6. Increase Net Profit Margin by Reducing Variable Costs

  7. Increase Net Profit Margin by Increasing Price Increase Net Profit Margin by Reducing Fixed Costs

  8. Tesco & Sainsbury’s • Case Study

  9. 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?

  10. 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)

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