Profit and Loss Calculations Overview

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Questions and Answers

What is the formula for Operating Profit?

Gross Profit - Distribution Costs - Administration Costs (correct)
Gross Profit - Revenue
Gross Profit - Finance Costs
Revenue - Cost of Sales - Taxation

Profit After Tax is calculated by adding Taxation to Profit Before Tax.

False (B)

Define Total Comprehensive Income.

Total Comprehensive Income is Profit After Tax plus Other Comprehensive Income (OCI).

EPS is calculated as Profit after tax and preferred dividend divided by _____ average number of shares.

<p>weighted</p> Signup and view all the answers

Match the following terms with their definitions:

<p>Gross Profit = Revenue minus Cost of Sales Profit Before Tax = Operating Profit minus Finance Costs EPS = Profit After Tax and preferred dividend divided by weighted average shares Retained Earnings = Prior retained earnings plus Profit for period minus Dividends paid</p> Signup and view all the answers

Flashcards

Gross Profit

The revenue generated from selling a product or service minus the cost of producing or acquiring that product or service.

Operating Profit

The profit a company makes after deducting all operating expenses, including distribution and administration costs.

Profit Before Tax

The profit a company makes before paying taxes. It includes operating profit minus any finance costs.

Profit After Tax

The profit remaining after paying taxes to the government.

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EPS (Earnings Per Share)

Earnings Per Share (EPS) is a measure of a company's profit allocated to each outstanding share of common stock. It is calculated by dividing the profit after tax and preferred dividends by the weighted average number of shares outstanding.

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Study Notes

Profit and Loss Calculations

Gross Profit is calculated by subtracting Cost of Sales (COS) from Revenue
Operating Profit is found by subtracting Distribution Costs and Administration Costs from Gross Profit
Profit Before Tax is calculated by subtracting Finance Costs from Operating Profit
Profit After Tax is determined by subtracting Taxation from Profit Before Tax
Total Comprehensive Income is the sum of Profit After Tax and Other Comprehensive Income (OCI)