Marketing Essentials

Section 2: Financial Aspects of a Business Plan

After You Read Online Action

Key Terms and Concepts

1. Gross profit or gross margin on sales is the difference between the net sales and the cost of goods sold. The formula for calculating gross profit is: Net Sales – Cost of Goods Sold = Gross Profit
2. Variable expenses change from one month to the next. Variable costs can fluctuate up or down depending upon the sales volume of the business. Fixed expenses are costs that remain the same for a period of time regardless of sales volume.
3. A balance sheet is a summary of a business' assets, liabilities, and owner's equity.

Academic Skills

4. Net sales = $308,900 ($315,000 - $6,100); Gross profit = $96,900 ($308,900 - $212,000); Net income from operations = $2,400 ($96,000 - $94,500)
5. Answers may include prompt invoicing to customers with good credit; managing payables by making timely, accurate payments, correcting over billing, and controlling overhead costs.