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Spireframe Software, makers of Value Investor - the easiest way to learn stock analysis and valuation of stocks. Spireframe Software, makers of Value Investor - the easiest way to learn stock analysis and valuation of stocks.  
Gross Profit Margin
Gross Profit 
 Gross Profit Margin =
Net Sales

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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