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The Gross Margin Ratio, also known as the gross profit margin ratio, is a profitability ratio that compares the gross profit of a company to its revenue.
The gross profit ratio is a profitability ratio expressed as a percentage hence it is multiplied by 100. Net sales consider both Cash and Credit Sales, on the other hand, gross profit is calculated as Net Sales minus COGS. The gross profit ratio helps to ascertain optimum selling prices and improve the efficiency of trading activities.
Definition: Gross profit ratio is a calculation that determines the correlation between a company’s gross profit margin and the net sales (gross sells net of credits and discounts issued).
May 1, 2024 · Gross Margin is a profitability ratio that measures the percentage of revenue remaining after deducting cost of goods sold (COGS).
May 13, 2024 · Guide to Gross Profit Percentage and its definition. We explain it along with its formula, how to calculate, vs gross margin, and examples.
Apr 13, 2024 · Profitability Ratio compares a profit measure to revenue to determine the remaining profits after certain types of expenses were deducted.
In this article, we’ll explore how to calculate gross profit percentage, what the gross profit ratio does and does not tell you about a business, as well as some of the benefits of understanding gross profit percentage. By understanding these helpful formulas, you’ll be one step close to gaining further insight into a company or business’ nature.
