Gross profit margin is used to compare business models with competitors. And is a financial metric used to assess a company's financial health and business model. By revealing the proportion of money left over from revenues after accounting for the cost of goods sold. The efficient or higher premium companies see higher profit margins.
Gross profit margin = Gross profit / Total revenue
Gross profit = Total revenue - COGS (Cost of goods sold)
A shops COGS (cost of goods sold is $30 and revenue $50, then the gross profit equals ($50 - $30) = $20
Applying the formula, $20 / $50 = 0.4 or 40%
Created: Jun 4, 2018
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