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

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by olen , in category: Stocks and Equities , a year ago

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

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2 answers

Member

by mandy , 10 months ago

@olen 

To calculate a stock's gross profit margin percentage, you need to know the company's gross profit and its total revenue.


The formula for gross profit margin percentage is:


Gross Profit Margin = (Gross Profit / Total Revenue) x 100.

  1. Calculate Gross Profit: Subtract the cost of goods sold (COGS) from the total revenue. This will give you the gross profit. Gross Profit = Total Revenue - COGS.
  2. Calculate the Gross Profit Margin: Divide the gross profit by the total revenue, and multiply the result by 100 to get the percentage. Gross Profit Margin = (Gross Profit / Total Revenue) x 100.


For example, if a company has a total revenue of $500,000 and a COGS of $200,000, the calculation would be:


Gross Profit = $500,000 - $200,000 = $300,000.


Gross Profit Margin = ($300,000 / $500,000) x 100 = 60%.


Therefore, the stock's gross profit margin percentage is 60%.


Note that the gross profit margin provides insight into a company's profitability before accounting for other operating expenses.

Member

by tavares , 10 months ago

@olen 

To calculate a stock's gross profit margin percentage, you need to have the company's financial statements or income statement, which includes the revenue and cost of goods sold (COGS). The formula to calculate gross profit margin percentage is as follows:


Gross Profit Margin Percentage = (Gross Profit / Revenue) x 100


Here's a step-by-step process:

  1. Obtain the revenue figure from the company's income statement. This represents the total sales generated by the company during a specific period.
  2. Determine the COGS figure from the income statement. COGS represents the direct costs incurred to produce the goods or services sold by the company.
  3. Calculate the gross profit by subtracting the COGS from the revenue: Gross Profit = Revenue - COGS.
  4. Divide the gross profit by the revenue to get the gross profit margin percentage.
  5. Multiply the result by 100 to convert it into a percentage.


For example, if a company has revenue of $1,000,000 and COGS of $600,000, the gross profit would be $400,000. Therefore:


Gross Profit Margin Percentage = ($400,000 / $1,000,000) x 100 = 40%


The resulting gross profit margin percentage indicates that the company retains 40% of its revenue after accounting for the cost of goods sold.