Gross profit margin

Gross profit margin

Gross profit margin is a financial ratio used to assess the profitability of a firm's core activities, excluding fixed costs.

The general calculation is

mathrm{Gross profit margin} = frac{mathrm{Revenue - Cost of Sales}}{mathrm{Revenue}}

The gross profit margin is related to the net profit margin, which assesses the profitability of an organization after including fixed costs.

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 is gross profit / sales revenue x 100.

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