I am trying to determine the correct way of calculating profit for a small business.? -

If I had a monthly sales value of ��5,700 and a monthly purchase cost of ��4,915, I would make ��785.Is this profit measured against monthly sales giving me 13.8% or monthly purchases giving me 16.0% profit before tax?

It s measured against sales (turnover). You work out what percentage of the turnover actually turns out to be profit, so your profit margin for that month is 13.8%.The way to remember it is, you don t make a profit on purchases, you only make a profit on what you sell.