How do you calculate a stock's gross profit margin?

by cedrick.casper , in category: Stocks and Equities , 10 months ago

How do you calculate a stock's gross profit margin?

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1 answer

by columbus_cummerata , 10 months ago

@cedrick.casper 

To calculate a stock's gross profit margin, you need to know the company's total revenue and cost of goods sold (COGS).


The formula for gross profit margin is: Gross Profit Margin = (Total Revenue - COGS) / Total Revenue * 100


Here's how to calculate it:

  1. Find the total revenue: This can be obtained from the company's income statement or financial statements.
  2. Calculate the cost of goods sold (COGS): COGS includes direct expenses related to producing or purchasing the goods that the company sells. This can also be found on the company's income statement or financial statements.
  3. Subtract the COGS from the total revenue: (Total Revenue - COGS).
  4. Divide the result by the total revenue: (Total Revenue - COGS) / Total Revenue.
  5. Multiply by 100 to express it as a percentage: ((Total Revenue - COGS) / Total Revenue) * 100.


The resulting percentage represents the gross profit margin of the stock. A higher gross profit margin is generally favorable as it indicates that the company is effectively producing goods and can cover its direct costs.