Wednesday, September 3, 2008

Calculate Gross Margin Financial Ratio

Gross Margin Ratio = Gross Profit ÷ Net Sales

$100,000 ÷ $500,000

=20%

The Gross Margin Ratio displays percentage of sales dollars available to cover expenses and increase profit after the cost of merchandise is deducted from a company's sales. The gross margin ratio is often used to compare companies across similar business sectors.

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