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What is the formula for calculating the gross profit margin?

Practice Questions

Q1
What is the formula for calculating the gross profit margin?
  1. (Sales - Cost of Goods Sold) / Sales
  2. Net Income / Total Assets
  3. Operating Income / Total Revenue
  4. Total Revenue / Total Expenses

Questions & Step-by-Step Solutions

What is the formula for calculating the gross profit margin?
  • Step 1: Identify the total sales amount (this is how much money you made from selling your products).
  • Step 2: Identify the cost of goods sold (this is how much it cost you to make or buy the products you sold).
  • Step 3: Subtract the cost of goods sold from the total sales amount. This gives you the gross profit.
  • Step 4: Take the gross profit and divide it by the total sales amount.
  • Step 5: Multiply the result by 100 to convert it into a percentage. This is your gross profit margin.
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