Sample Essay

For the sake of the Target store, the ratios are as follows:

The gross profit margin is financial ratio used to evaluate the profitability of a firm’s core operations exclusive of its fixed costs[1]. It measures how well each unit of money of the company’s income is available to cater for expenses and profits after taking care of the cost of goods sold. A high margin indicates that a company is in the right path as long as the overhead costs are minimized. Gross profit margin=revenue-cost of sales/revenue.

The gross profit margins for the 2004-2009 periods are given below.

 

year revenue cost of sales gross profit GP margin GP margin as % %change in sales

2004

51236

37355

13881

0.271

27.09

1.08138

2005

55406

39105

16301

0.294

29.42

1.07371

2006

59490

41073

18417

0.310

30.96

1.06517

2007

63367

43766

19601

0.309

30.93

1.02495

2008

64948

45766

19182

0.295

29.53

1.00629

2009

65357

45583

19774

0.303

30.26

0

According to this data, the Gross profit margin is all right since it seems to be increasing.

The net profit margin is a ratio of financial analysis that is used to reflect a firm’s pricing policy as well as the firm’s ability to control costs.

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