Calculating gross profit margin and net profit margin

One of the most basic measures of profitability is how much money a company…makes on each item it sells.…You can analyze a company's profit by subtracting the cost of goods sold from…total revenue and then dividing that result by total sales revenue.…The result is the gross profit ratio.…A company's gross revenue ignores all expenses except the cost of goods sold.…In industry lingo, gross revenue is Earnings Before Interest, Taxes,…Depreciation, and Amortization or EBITDA.…So here in the worksheet, you can see that we have the Sales Revenue and…the Cost of Goods Sold.…

So again what we're going to do is subtract cost of goods sold from sales…revenue and then divide it by sales revenue to get the gross profit margin.…So = (B5-B6/B5), press Enter, and there is our ratio, 0.56.…You can calculate a company's gross profit margin for all of its products, but…you can also break the numbers down by product to get an idea of how efficiently…a product contributes to the company's bottom line.…Some companies follow what's called a Loss Leader Strategy, where they sell one…