Gross Profit Measure

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A Gross Profit Measure is a microeconomic measure based the difference net revenue and cost of goods sold.



References

2017a

  • (Wikipedia, 2017) ⇒ https://en.wikipedia.org/wiki/Gross_margin Retrieved:2017-2-17.
    • Gross margin is the difference between revenue and cost of goods sold, or COGS, divided by revenue, expressed as a percentage. Generally, it is calculated as the selling price of an item, less the cost of goods sold (production or acquisition costs, essentially). Gross Margin is often used interchangeably with Gross Profit, but the terms are different. When speaking about a dollar amount, it is technically correct to use the term Gross Profit; when referring to a percentage or ratio, it is correct to use Gross Margin. In other words, Gross Margin is a % value, while Gross Profit is a $ value. ...

2017b

  • (Wikipedia, 2017) ⇒ https://en.wikipedia.org/wiki/gross_margin#Construction Retrieved:2017-2-17.
    • … It can be expressed in absolute terms: Gross margin = net sales – cost of goods sold + annual sales return or as the ratio of gross profit to revenue, usually in the form of a percentage: ...

      ... Retailers can measure their profit by using two basic methods, markup and margin, both of which give a description of the gross profit. The markup expresses profit as a percentage of the retailer's cost for the product. ...

      ... In accounting, the gross margin refers to sales minus cost of goods sold. It is not necessarily profit as other expenses such as sales, administrative, and financial must be deducted. And it means companies are reducing their cost of production or passing their cost to customers. The higher the ratio, the better. ...

      ... Converting between gross margin and markup (Gross Profit)

2016

  • http://www.investopedia.com/terms/g/gross_profit_margin.asp
    • QUOTE: Gross profit margin 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 (COGS). Gross profit margin, also known as gross margin, is calculated by dividing gross profit by revenues. Also known as "gross margin." …

      … There are several layers of profitability that analysts monitor to assess the performance of a company, including gross profit, operating profit and net income. Each level provides information about a company's profitability. Gross profit, the first level of profitability, tells analysts how good a company is at creating a product or providing a service compared to its competitors. Gross profit margin, calculated as gross profit divided by revenues, allows analysts to compare business models with a quantifiable metric.

      Gross margin changes may also be driven by industry changes in regulation or even changes in a company's pricing strategy. If a company sells its products at a premium in the market, all other things equal, it has a higher gross margin. The conundrum is if the price is too high, customers may not buy the product.