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Gross Profit
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| Gross Profit Margin =
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Net Sales
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Explanation of Gross Profit Margin:
The Gross Profit Margin measures the Gross Profit in relation
to the Net Sales. This will reveal how much profit remains out of each
dollar of sales. For example a Gross Profit Margin of 0.23 (23%) means
that for each dollar of sales, 23% of that dollar is Gross Profit to the
company.
Importance of Gross Profit Margin:
The higher the Gross Profit Margin, the better the company is able
to control costs - either by reducing the costs of production of their products
or services, or passing some of the costs to the customer.
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