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
