Gross profit margin
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Gross profit margin is a financial ratio used to assess the profitability of a firm's core activities, excluding fixed costs. It is a measure of how well each dollar of a company's revenue is available to meet expenses and profits after paying for the goods or services that were sold.[1]
The general calculation is:
The gross profit margin is related to the net profit margin, which assesses the profitability of an organization after including fixed costs.
Gross profit margin indicates the relationship between net sales revenue and the cost of goods sold. A high gross profit margin indicates that a business can make a reasonable profit on sales, as long as it keeps overhead costs in control.
Gross profit percentage is (gross profit / sales revenue) x 100.
[edit] See also
[edit] References
- ^ Berman, Karen (2006). Financial Intelligence. Boston: Harvard Business School Press. p. 152. ISBN 1591397642.
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