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How to Calculate Gross Profit

How to Calculate Gross Profit
Gross Profit  It is a required income statement entry that indicates total revenue minus cost of goods sold. It is the company’s profit before operating expenses, interest payment and taxes. It is also known as GROSS MARGIN. The gross profit on a product is computed as: Net Sales – Cost of Goods Sold (COGS) This concept is well understood if you are able to clearly distinguish between variable and fixed costs. VARIABLE COSTS: Materials used Direct labor Packaging Freight Plant supervisor salaries Utilities for a plant or a warehouse Depreciation expense on production equipment Machinery  FIXED COSTS: Fixed costs generally are more static in nature. They include: Office expenses such as supplies, utilities, a telephone for the office, etc. Salaries and wages of office staff, salespeople, officers and owners Payroll taxes and employee benefits Advertising, promotional and other sales expenses Insurance Auto expenses for salespeople Professional fees Rent  Variable expenses are logged as cost of goods sold. Fixed expenses are counted as operating expenses (sometimes called selling and general administrative expenses). While gross profit is a monetary entity, the margin is expressed as a percentage. It’s equally significant to track since it allows you to keep an eye on profitability trends. Gross Profit Ratio = Gross Profit / Net Sales The gross profit margin is computed as follows: When the ratio is expressed in percentage form, it is known as gross profit margin or percentage. Gross Profit / Net Sales *100 = Gross Profit Margin It is equal to the net sales minus cost of goods sold and net sales are equal to total gross sales less return inwards and discount allowed. Benefits of calculating gross profit: This ratio determines how efficiently the management utilizes labor and raw materials A company uses its gross income to fund activities such as research and development, marketing etc., which are vital for generating future sales. A prolonged decline in this margin is a cleat-cut indication of sales drop-down and ultimately earnings. Trends in this margin reflect basic pricing decisions and material costs of a company. This profit margin is an accounting measure designed to estimate the financial health of a business or industry. It may be noted that generating a profit margin alone cannot vouch for the financial health of a firm; rather the business must have sufficient cash flow in order to pay its bills and compensate employees. An entrepreneur might compare the return that would be available from a bank or another low-risk investment opportunity to that of his EXISTING profit-margin to gauge whether his startup is doing well. → Profitability...
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What Does a Career in Accounting Demands for?

What Does a Career in Accounting Demands for?
What Does a Career in Accounting Demands for? Are you vying for a career in accounting field? Everybody envy accountants for there is a misconception that they are Demi-Gods. Though a good accounts manager can act like one who can save you from a dire situation by manipulating the accounts skilfully, the demands and challenges in this field are too high to be savored. Purchase Your Copy of “Careers with a Degree in Accountancy and Finance” at Gumroad  So what does it take to become a reputed accounts man in your circle and also enjoy what you do! Self analysis is the best way to understand what you really want to be. There are certain traits characteristic to people belonging to this community. See if you are gifted with those attributes; if not, you can always train yourself to gain expertise. 1. Are you good at numbers– Mathematics, Yuck! If this is your reaction please quit reading this article as numbers play an integral role in accountancy. Figures, Figures and more Figures determine the profit and loss status of a company. If you are passionate about playing with numbers it goes without saying you are already a half accountant. The thrill of taking control and handling numbers make or break a company. Jackie Mansion jocularly puts it – “Did you ever hear of a kid playing accountant – even if they wanted to be one?” 2. Are you a good listener and can you read between the lines? A good auditor will allow the client to talk and listen to what he says. Then he tries to extract the exact kind of information he needs to make the ends meet. Empathy is an innate quality and if you are not going to be a good listener then please revise your consideration of becoming an accountant. Sometimes the client may not know what you wish to seek; it is your responsibility to frame simple questions in a language that he understands and pull out answers. 3. Can you avoid being temperamental? 90% of the time your clients are going to say “No” to whatever you suggest. Alas, it is not their fault; the corporate Bosses and CEO’s always aim big and most probably will not be aware of the consequences of their impulsive actions. They always think about clinching a deal and conveniently overlook the effects of their financial and corporate decisions on the account and subsequently on the accountant. For example cash has to be handled very carefully and every penny has to be accounted for properly.  A bank cashier will know the importance of cash handling as it is very important for them to balance the inflow and outflow at the end of the day. For corporate firms, it becomes mandatory to reduce the cash dealings and account every transaction in the form of a check or electronic transfers like RTGS or NEFT or EFT. The point is, you should have the nerve to talk to a company’s head if he is planning for a bad move and suggest what could be done for the good of the company (Income tax and Sales purposes). 4. Are you wise when it comes to choosing clients? Whether you are a part time practitioner, Full time accountant, Accounts manager or Free lancer, do your homework before accepting the offer. Ultimately you need to see your payments coming through and nobody works here for a song. Big practitioners take a big cut half yearly or annually but if you are a part time accountant, it is always better to go for monthly payments or get paid after the completion of individual project s....
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Business Quiz 1

ProProfs – Business Management Quiz 1 Business Quiz with Multiple Choice...
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Scope of Financial Management

Scope of Financial Management
Scope of Financial Management Facebook Buys WhatsApp: Boneheaded or Brilliant? This was the title of a  Forbes Article when Mark Zuckerberg acquired Whatsapp for $19 billion dollars, the price that may exceed the GNP of some of those countries. Mark is said to be an unconventional thinker and the WhatsApp acquisition shows Facebook’s determination to follow the road not yet paved. It is a bold move, yet filled with risks along the way. This is one of the finest examples of the big investment decisions of recent times and the right course of action,  if you measure the number of potential users of the mobile messaging service rather than the cost of acquiring each user and the potential for selling ads to each user today. Follow these mind blowing tips to become prosperous Picture Courtesy : YoungHstlrs Financial management is one of the important aspects of overall management, which is directly asscoiated with various functional departments like personnel, marketing and production. Financial management embraces wide area with multidimensional approaches. The following are the important scope of financial management. https://www.youtube.com/watch?v=2yrI2sM8LhI Some of the major scope of financial management are as follows: 1. Investment Decision 2. Financing Decision 3. Dividend Decision 4. Working Capital Decision. 1. Investment Decision: The investment decision involves Risk EvaluationMeasurement of cost of capital andEstimation of expected benefits from a project. Capital budgeting and liquidity are the other two major components of investment decision. Capital budgeting takes care of the distribution of capital and commitment of funds in permanent assets to harvest revenue in future. Capital budgeting is a very focal decision as it impacts the long-term success and growth of a firm. All the same it is a very tough decision because it encompasses the estimation of costs and benefits which are uncertain and unknown.   Picture Courtesy: Crowdfundingheroes 2. Financing Decision: Financing decision is related to financing mix or financial structure of the firm. The raising of funds requires decisions regarding Methods and sources of financeRelative proportion and choice between alternative sourcesTime of floatation of securities, etc. In order to meet its investment needs, a firm can raise funds from various sources. Long Term Sources of Finance: Share Capital or Equity SharesPreference Capital or Preference SharesRetained Earnings or Internal AccrualsDebenture / BondsTerm Loans from Financial Institutes, Government, and Commercial BanksVenture FundingAsset SecuritizationInternational Financing by way of Euro Issue, Foreign Currency Loans, ADR, GDR etc.  Picture Courtesy: Cash & Treasury Management file   Medium Term Sources of Finance: Preference Capital or Preference SharesDebenture / BondsMedium Term Loans fromFinancial InstitutesGovernment, andCommercial BanksLease FinanceHire Purchase Finance   Short Term Sources of Finance: Trade CreditShort Term Loans like Working Capital Loans from Commercial BanksFixed Deposits for a period of 1 year or lessAdvances received from customersCreditorsPayablesFactoring ServicesBill Discounting etc.   3. Dividend Decision: In order to accomplish the goal of wealth maximization, a proper dividend policy must be established. One feature of dividend policy is to decide whether to distribute all the profits in the form of dividends or to plough back the profit into business. While deciding the optimum dividend payout ratio (proportion of net profits to be paid out to shareholders), the finance manager should consider the following: Investment opportunities available to the firmPlans for expansion and growth,Dividend stabilityForm of dividends, i.e., cash dividends or stock dividends, etc.   4. Working Capital Decision: Working capital decision is related to the FINANCING in current assets and current liabilities. Current assets include cash, receivables, inventory, short-term securities, etc. Current liabilities consist of creditors, bills payable, outstanding expenses, bank overdraft, etc. Current assets are those assets which are convertible into cash within a year. Similarly, current liabilities are those liabilities, which are likely to mature for payment...
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Does your company have what it takes to be a leader-1

Does your company have what it takes to be a leader-1
What it takes to be a Leader What is #Corporate Social Responsibility? High performance is generally measured against key business imperatives including #competitive advantage, #sales, #talent management, #operational efficiency, #return on investment and profitability. It is no longer adequate for a corporation to revel in economic prosperity in isolation from those agents impacted by its actions. Today, a new element of leadership is making an intense difference in weighing  business performance: Corporate Social Responsibility. The late 1990s and the early 2000s saw an uptake in businesses giving proceeds or providing volunteers to causes related to their brands. Some called it “corporate social responsibility”; others called it “corporate #philanthropy” or “#corporate citizenship.” Regardless of its title, it was a way for business to increase visibility while raising funds for good. The spotlight is on both increasing the firm’s bottom line and being a good corporate citizen. Keeping abreast of global trends and remaining committed to financial obligations to deliver both private and public benefits have compelled organizations to restructure their frameworks, rules, and business models. Where does the roots of CSR lie? Although the #roots of CSR lie in altruistic activities (such as donations, charity, relief work, etc.) of corporations, globally, the concept of CSR has evolved and now embraces all allied concepts such as triple bottom line, corporate citizenship, philanthropy, #strategic philanthropy, #shared value, #corporate sustainability and business responsibility. You might be wondering what is “Triple bottom line?” (abbreviated as TBL or 3BL) – The term coined by John Elkington in 1994,  incorporates the notion of sustainability into business decisions. The TBL is an #accounting framework with three dimensions: social, environmental (or ecological) and financial. “A plethora of research points to a majority of stakeholders agreeing that CSR is a ‘must do’,” and  67% of consumers say they are more likely to buy products and services from a company if they know it supported good causes. Smart Corporations: As a key component in business #strategy and execution, CSR is playing a crucial role in helping organizations to be seen as leaders. Smart corporations are allocating increasing internal resources to CSR investments that include clear objectives and furnish measurable social outcomes. India is a country of multitude contradictions. On the one hand, it has grown to be one of the major economies in the world, and an increasingly important player in the emerging global order, on the other hand, it is still home to the largest number of people living in absolute poverty (even if the proportion of poor people has decreased) and the largest number of malnourished children. This is the sad state of uneven distribution of the benefits of growth which many believe, is the root cause of social unrest. Companies too have been the target of those disconcerted by this lop-sided development and as a result, their contributions to society are under severe scrutiny. Many companies have been astute to sense this development, and have responded proactively while others have done so only when advocated. What it takes to be a Leader-2...
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