Margins and returns for GCSE Business

GCSE Business, Finance. Usually met in years 9 to 11.

Calculate gross and net profit margins, the average rate of return and percentage changes.

What you practise

Gross profit and gross profit margin
Net profit margin
Average rate of return and percentage change

Starts with gross profit and builds to average rate of return and falls in sales. Practice moves up a level when a round goes well and down when it does not.

Sample questions

Each sample comes with the method and the reason every wrong option is wrong. Real practice rounds are ten questions at your level.

Sample question, level 2 of 5

Revenue is £140,000 and gross profit is £63,000. What is the gross profit margin?

55%
450%
0.5%
45%
222.2%

Show the answer and method

Answer: D, 45%

The method: Gross profit margin = gross profit ÷ revenue × 100 = £63,000 ÷ £140,000 × 100 = 45%.

Why the other options are wrong:

A, 55%: That is cost of sales as a percentage of revenue.
B, 450%: The decimal point is one place out.
C, 0.5%: Multiply by 100 to make it a percentage.
E, 222.2%: The division is upside down: gross profit ÷ revenue.

Sample question, level 4 of 5

A machine costs £180,000 and is expected to make an average profit of £14,400 a year over 3 years. What is the average rate of return?

0.1%
8%
24%
2.7%
12.5%

Show the answer and method

Answer: B, 8%

The method: ARR = average annual profit ÷ cost of investment × 100 = £14,400 ÷ £180,000 × 100 = 8%.

Why the other options are wrong:

A, 0.1%: Multiply by 100 to make it a percentage.
C, 24%: Use the average profit for one year, not all the years together.
D, 2.7%: The average profit is already for one year.
E, 12.5%: The division is upside down: average annual profit ÷ cost × 100.

See where this fits: every GCSE option topic and Key Stage 3.