What Is the Relationship Between Gross Margin and Profit Margin?

Gross profit margin (Gross Profit Margin) is the percentage of gross profit and sales revenue (or operating income), where gross profit is the difference between revenue and operating costs corresponding to revenue, expressed by the formula: gross profit margin = gross profit / operating income × 100 % = (Main Business Income-Main Business Cost) / Main Business Revenue × 100%.

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Gross profit margin (Gross Profit Margin) is the percentage of gross profit and sales revenue (or operating income), where gross profit is the difference between revenue and operating costs corresponding to revenue, expressed by the formula: gross profit margin = gross profit / operating income × 100 % = (Main Business Income-Main Business Cost) / Main Business Revenue × 100%.

In terms of composition, gross profit is the difference between revenue and operating costs, but in fact this understanding reverses the concept of gross profit margins. In fact, the gross profit margin reflects the value-added part of a product after it has been transformed into its internal system. In other words, the more the value added, the more the gross profit will naturally increase. For example, the product is designed differently through research and development, adding some features compared to competitors, and

1. Divided by product category : individual product gross profit margin, major product gross profit margin, comprehensive commodity gross profit margin

2. By industry : products of industrial enterprises

   1. Gross profit margin = (sales revenue-cost of sales) / sales revenue × 100% = (sales price without tax-purchase price without tax) / sales price without tax × 100%

   2. Gross profit margin = (1-purchase price without tax / sale price without tax) × 100%

   Comprehensive gross profit margin

   The gross profit margin usually depends on the following factors:

   Business owners are rational economic people. It is not always possible to do business at a loss. Gross profit is the basis for profitable business operations. To operate profitably, a company must first obtain sufficient gross profit. Under other conditions, the gross profit Large, high gross margin means

   A. It is known that the purchase price of a certain product is RMB 13.5 without tax and the price is RMB 15 without tax. What is the gross profit margin of the product?

   1.Gross margin = (price without tax-purchase price without tax) / price without tax × 100%

   2.Gross margin = (15-13.5) / 15 * 100% = 10%

   B. It is known that a certain product has a purchase price of 800 yuan without tax and a sales price of 990 yuan with tax.

   Analysis type	financial indicator
   Liquidity	Current ratio | Quick ratio |
   asset Management	Inventory turnover rate | Inventory turnover days | Accounts receivable turnover rate | Accounts receivable turnover days | Business cycle | Current asset turnover rate | Total asset turnover rate
   Debt	Asset-liability ratio | Equity ratio | Tangible net worth debt ratio | Interest multiples earned
   Profitability	Net Sales Margin | Gross Margin Sales | Net Asset Margin | Return on Net Assets
   cash flow	Cash due debt ratio | Cash flow debt ratio | Total cash debt ratio | Sales cash ratio | Operating cash flow per share | Cash recovery ratio of all assets
   Financial flexibility	Cash Satisfaction Investment Ratio | Cash Dividend Protection Multiples | Cash Operating Index