Financial Encyclopedia
Gross Profit Margin
Definition
Gross Profit Margin is a company's net sales excluding cost of goods sold (COGS), expressed as a percentage of revenue.
Example
Gross Profit Margin calculated for PJSC Tatneft:
Gross Profit Margin (2017) = 211 557 951 / 581 536 880 * 100% = 36,4%
Gross Profit Margin (2018) = 318 713 036 / 793 237 174 * 100% = 40,2%
Gross Profit Margin (2019) = 321 345 898 / 827 026 695 * 100% = 38,9%
More detailed
Gross Profit Margin = (Net Sales - COGS) / Net Sales *100%
The indicator demonstrates the company's profitability in terms of gross profit and is used in financial analysis to assess the performance of large companies and industries when it is difficult to assess net profit.
The higher the gross margin, the better because the more revenue a company has to pay other costs or satisfy debt obligations.
According to Ranks methodology, this indicator is analyzed in the Financial position and Growth blocks and used along with other indicators to calculate the score.
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