Gross profit – Meaning & Formula

Gross profit also known as gross income is the excess of net sales over cost of goods sold. Put it simple, gross income is the difference between net revenue (net sale) and cost of goods sold. Gross income accounts for operating expenses, interests and taxes. Formula for the calculation of gross profit: Gross income =…


Net profit – Meaning & Formula

Net profit is the excess of a company’s net revenue (net sales) over its total expenses. For this purpose, total expenses include both direct and indirect expenses as well as interest and taxes. If a company is liable to pay dividend to preference shareholders then the amount of dividend is also subtracted to get this…


Net profit margin – Meaning & Formula

Net profit margin is calculated by dividing the amount of net profit by net sale. This is one of the important profitability ratios used to gauge the overall profitability of a firm. This ratio is often used to measure the efficiency of a management to derive profit out of its sale. Net profit is the…


Operating profit margin – Meaning & Formula

Operating profit margin is one of the profitability ratios used to gauge the operating profitability of a firm. This ratio represents the relationship between operating profit and net sale of a firm. Operating profit is calculated by subtracting the amount of cost of goods sold (COGS) and operating expenses from total sales. This is the…


Gross profit margin – Meaning & Formula

Gross profit margin is one of the profitability ratios used to gauge the general profitability of a firm. This ratio represents the relationship between gross profit and net sale of a firm. The main usability of this ratio is to measure the effectiveness of firm to generate profit out of its sale. Gross profit margin is…