The gross profit margin ratio analysis is an indicator of a company’s financial health. What is the Gross Margin Ratio? In addition to gross profit, gross margin can also be used as a percentage of net sales, which in business lingo is commonly known as gross profit percentage or gross margin ratio. Determining gross profit margin is a simple calculation with the option to calculate margin using a dollar amount or a percentage. Number of U.S. listed companies included in the calculation: 3984 (year 2019) . Easily calculated, gross margin ratio provides you with a quick snapshot of profitability. Some industries, such as retail jewelry stores, have gross profit margins exceeding 50 percent, while others, such as grocery stores, might average less than 30 percent. You calculate the gross margin ratio as follows: Gross margin ÷ Sales revenue = Gross margin ratio. Gross margin ratio is an important metric for your business. Gross profit margin ratio = (15,000 -10,000) / 15,000 = 33%. It is a ratio that indicates the performance of a company's sales based on the efficiency of its production process. The gross profit margin formula. Gross profit margin, also known as gross margin, is a financial metric that indicates how efficient a business is at managing its operations. For example, drawing from financial results posted on the Fidelity website, Starbucks (SBUX) has this history of gross margin and gross margin ratio: 2013: Sales = $14,892; Cost of Goods Sold = $11,126 Ratio: Gross margin Measure of center: Gross profit margins vary by industry. Gross margin - breakdown by industry. The gross profit margin (also known as gross profit rate, or gross profit ratio) is a profitability measure that shows the percentage of gross profit in comparison to sales.In other words, it calculates the ratio of profit left of sales after deducting cost of sales. The gross margin ratio is the gross margin (also called gross profit or loss) divided by sales. To calculate this ratio, divide gross profits by net sales.For example, a seller ships goods to a customer and bills the customer $10,000, while also charging the $3,000 cost of the shipped goods to expense. On a monthly revenue of $40,000 and COGS of $25,000, your gross margin is the $15,000 gross profit divided … Gross margin is a simple financial ratio that shows how much of your periodic revenue is left after you subtract costs of goods sold, or COGS. Gross profit margin (gross margin) is the ratio of gross profit (gross sales less cost of sales) to sales revenue. In conclusion, for every dollar generated in sales, the company has 33 cents left over to cover basic operating costs and profit. More about gross margin. Gross Profit Margin Ratio Analysis. A good gross profit margin is enough to cover overhead and leave a reasonable net profit. Calculation: Gross profit margin = Gross profit / Revenue. 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