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what is the formula for gross profit rate. It is used to examine the ability of a business to create sellable products in a cost-effective manner. Calculate and interpret the gross profit ratio from the following information of John Trading Concern for the year 2016.
Gross Profit Margin Expresses Gross Profit As A Percentage Gross Profit Turnover X 100 Gross Profit Margin Pricing Formula Profitable Business Finance Blog from www.pinterest.com
Gross profit divided by net sales x 100 The gross profit is the cost of goods sold minus the total net sales figure. The gross profit margin compares gross profit to total revenue reflecting the percentage of each revenue dollar that is retained as profit after paying for the cost of production. The ratio thus reflects the margin of profit that a concern is able to earn on its trading and manufacturing activity.
A more restrictive version of the formula is to only include direct materials which may be the only truly variable element of the cost of goods sold.
It is used to examine the ability of a business to create sellable products in a cost-effective manner. The gross profit percentage formula is calculated by subtracting cost of goods sold from total revenues and dividing the difference by total revenues. The ratio thus reflects the margin of profit that a concern is able to earn on its trading and manufacturing activity. The net profit margin is net profit divided by revenue or net income divided by net sales.
