Welcome to this deck on making financial decisions. For any business, understanding the numbers is crucial for survival and growth. In this topic, we'll explore the key calculations you need to know for your GCSE Business exam. We'll learn how to calculate profit in two different ways, how to measure profitability using margins, and how to decide if an investment is worthwhile. Let's get started.

Before we can talk about profit, we need to understand where the money comes from and what the most direct costs are. The money a business earns from selling its goods or services is called revenue. The formula for this is simply the selling price per unit multiplied by the quantity of units sold. However, to make those sales, there are direct costs, like the cost of raw materials or stock. In business, we call this the 'cost of sales'.

The first and most basic measure of profit is Gross Profit. This tells you how much money a business has made from the simple act of buying and selling its products, before considering any other operational costs. To calculate it, you take the revenue and subtract the cost of sales. It's a vital first look at how profitable the core business activity is.