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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