What is Gross Profit communicating to us? What is Gross Margin communicating to us?

Expert Solution

Gross Profit

It is an item that appears in the Trading and P&L Account of a company. It is the difference between net sales revenue and cost of sales of a business. Here, the net sales revenue refers to the total revenue less the cost of sales returns, allowances and discounts. Whereas, the cost of sales refers to all the costs incurred to create a product or a service.

Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). In other words, it is the sales revenue a company retains after incurring the direct costs associated with producing the goods it sells, and the services it provides. The higher the gross margin, the more capital a company retains on each dollar of sales, which it can then use to pay other costs or satisfy debt obligations. The net sales figure is simply gross revenue, less the returns, allowances, and discounts.

The Formula for Gross Margin Is

Gross Margin=Net Sales−COGS

where:COGS=Cost of goods sold

ekkarill92 answered 1 year ago

If Gross Profit Margin is 55%, what is COGS %?

What is the firm's current year gross profit margin?

Category Prior Year Current YearAccounts payable ??? ???Accounts receivable 320,715 397,400Accruals 40,500 33,750Additional paid in capital 500,000 541,650Cash 17,500 47,500Common Stock 94,000 105,000COGS 328,500 428,048.00Current portion long-term debt 33,750 35,000Depreciation expense 54,000 54,731.00Interest expense 40,500 41,017.00Inventories 279,000 288,000Long-term debt 339,670.00 401,877.00Net fixed assets 946,535 999,000Notes payable 148,500 162,000Operating expenses (excl. depr.) 126,000 161,905.00Retained earnings 306,000 342,000Sales 639,000 850,323.00Taxes 24,750 48,686.00What is the firm's current year gross profit margin?

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