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Gross Profit Margin
Business
WHAT IS IT?
Gross profit margin is gross profit expressed as a percentage of sales.
IN PLAIN ENGLISH
For every £1 of sales, it tells you how much remains after direct costs.
SIMPLE EXAMPLE
If sales are £100 and direct costs are £40, gross profit is £60 and gross profit margin is 60%.
WHY DOES IT MATTER
A change in gross profit margin can have a significant effect on break-even and profit, even when sales increase.
THE ROCKET TEST
It is the percentage of sales left after the direct cost of making or delivering the sale.
SEE IT IN ACTION
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