Gross Profit Margin Ratio

Your gross profit margin can be calculated with the following formula, using figures taken from your income statement:


Recall that gross profit is the amount of sales dollars remaining after the cost of goods sold has been deducted.

If your gross profit margin is declining over time, it may mean that your inventory management needs to be improved, or that your selling prices are not rising as fast as the costs of the goods you sell. If you are a manufacturer, it may mean that your costs of production are rising faster than your prices, and adjustments on either side (or both) are necessary.

Be the first to comment on "Gross Profit Margin Ratio"

Leave a comment

Your email address will not be published.


This site uses Akismet to reduce spam. Learn how your comment data is processed.