Profit – meaning, types and structure II


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In today’s Commerce class, We will be learning about Business Finance. We hope you enjoy the class!


profit and loss maths classnotesng



This refers to the total net sales during a period.  The turnover is variously referred to as the stock-turn, sales turnover or stock-turnover.


THE RATE OF TURNOVER (or Rate of Stock – turn)

This refers to the number of times average stock is sold during a given period, usually a year.

It is calculated by dwindling the cost of goods sold by average stock.  This means that to find the rate of turnover first, the cost of goods sold must be calculated thus:

COST OF GOODS SOLD                        N

Opening Stock                                           5,000

Add purchases                                          35,000



Less: Closing stock                                     8,000

COST OF GOODS SOLD                          32,000




COST OF GOODS SOLD:                              N

Sales                                                                 50,000

Less: Gross profit                                              18,000



Secondly, the average stock must be calculated thus:


AVERAGE STOCK = OPENING STOCK + CLOSING STOCK2                                    = 5000 + 80002 = 130002 = N6,500Finally, find the rate of turnover thus:Rate of Turnover = Cost of goods soldAverage Stock                              = 32,0006,500 




The number of times a trader buys goods and resells them determines the size of his gross profit.  In other words, a trader’s gross profit can be increased by boosting his rate of turnover.  The various measures to be applied to increase the rate of turnover of a business can be inferred by considering the following factors which affect the rate of turnover.

  1. Nature of the product.
  2. Advertisement and Sales Promotion
  3. Location of the business.
  4. Goodwill or reputation of the seller
  5. Prices
  6. Wide variety of products offered for sale
  7. Reliability and frequency of supply
  8. Credit facilities.
  9. Application of modern sales techniques e.g. self-services that encourage impulse buying
  10. The number of sales outlets or branches of the business.



  1. Distinguish between turnover and rate of turnover.
  2. If the cost of goods sold is N4000 and the stock is turned over five times yielding a profit of 10% on sale, calculate the:

(a)      Average stock

(b)      Gross profit

(c)      Turnover



Essential Commerce for SSS by O.A Longe page 131-143. 


  1. Describe four types of risks that may be insured against under marine insurance
  2. State and explain five classes of shares a public limited company can issue
  3. Explain seven reasons for government participation in business enterprises
  4. State seven demerits of government participation in business enterprises
  5. State seven characteristics of a co-operative society



  1. Outline any seven factors, which might affect the rate of turnover
  2. Distinguish between gross profit and net profit.





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