Essay: The gross profit margin

Sample Essay Gross Profit Margin

The gross profit margin is a financial ratio used to evaluate the profitability of a firm’s core operations exclusive of its fixed costs[1]. Gross profit margin = revenue-cost of sales/revenue.

RATIOS 2004 2005 2006 2007
Gross Margin (%)-Google 58,60 62,80 65,55 65,76
Gross Margin (%)-Yahoo 62 60 58 59


ROCE is a short form for return on capital employed. It is a measure of the returns that a company or business realizes given the capital that was used or employed. It can be used to measure performance between businesses or to evaluate whether a business produces enough returns to be able to pay for the cost of its capital. ROCE=earnings before interest and taxes (EBIT)/capital employed. Capital employed is given by total assets and current liabilities.

RATIOS 2004 2005 2006 2007
Return on Capital Employ.(%)-Google 21,9 22,49 23,36 24,36
Return on Capital Employ. (%)-Yahoo n.a. n.a. n.a. n.a.

[1] Berman, Karen (2006). Financial Intelligence.Boston:HarvardBusinessSchool Press

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