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Gross Profit Margin %

What is Gross Profit Margin Ratio? By definition, gross profit margin Ratio is Gross Profit divided by Total revenue of a company. Generally, gross profit margin and Total revenue comes from a company’s income statement. Use the income statement template within this site to create a full income statement. Gross Profit Margin is calculated by subtracting cost of goods sold(COGS) from Total Revenue and Total Revenue is Sales minus any discounts, returns or allowances. Gross profit margin ratio also known as markup %, markup, gross profit %.

Importance:

Gross Profit Margin Ratio important financial metrics used to assess a firm’s markup of a product. It provides a company’s performance before any other expenses. The higher the gross profit margin the better a company mark up for profit before any other expenses. However, we need to comparative data to understand how gross profit margin aligns with the industry.

Example:

A company has total revenue of $500,000 and cost of goods sold $100,000. What is the company’s Gross Profit Margin Ratio or markup %.

Step 1:
Find the gross profit
Total Revenue $500,000 - Cost of Goods Sold $100,000 = $400,000

Step 2:
Find the markup
$400,000/$500,000 = .80 or 80%

The company has 80% of markup.

Suggested Calculators:

Return on Assets (RAO)
Earnings Per Share (EPS)

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