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Tuesday, July 21, 2009

Profit margin ratio

Profit margin:

It measures the relationship between profit and sales. As the profits may be gross or net, there are two types of profit margins:

Gross profit margin:

It is also known as gross margin. It is calculated by dividing gross profit by sales.


Net profit margin:

It is also known as net margin. This measures the relationship between net profits and sales of a firm.

Depending on the concept of net profit employed, this ratio can be computed in 3 ways:













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