Using The Income Statement aqa

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Exam code:8132

Profit margins

Profit margins measure how successfully a business converts revenue into profit
Profitability can be measured in two ways:

The gross profit margin

The proportion of revenue that is converted into gross profit
It is calculated using the formula

$Gross space profit space margin space equals space fraction numerator Gross space profit over denominator Revenue end fraction space straight x space 100$

Worked Example

Head to Toe Wellbeing’s revenue in 2022 was $124,653. Its gross profit was $105,731

Calculate Head to Toe Wellbeing Ltd’s gross profit margin in 2022. [2 marks]

Step 1: Substitute the values into the formula

$Gross space profit space equals space fraction numerator Gross space profit space over denominator Sales space revenue end fraction space cross times space 100 space space space$

$equals space fraction numerator $ 105 comma 731 over denominator space $ 124 comma 653 space end fraction equals space space 0.8482 space$ [1]

Step 2: Multiply the outcome by 100 to find the percentage

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Business GCSE AQA

Using The Income Statement aqa

Profit margins

The gross profit margin

Worked Example

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