Jun 062021
 

There are many ways to measure a firm’s profitability. One of the more important ones is the gross margin. This compares gross profit (sales minus cost of goods sold) with the sales figure as a percentage.

So if a firm’s sales are £1m with cost of sales of £800,000, gross profit is £200,000 and the gross margin is 20% – i.e. (200,000/1m) x 100%. The higher the figure the better, as it indicates that the firm’s core activity is profitable.

However, by itself it is not the full picture. It excludes overheads. That’s why analysts often also calculate an operating profit margin too (operating profit is gross profit less selling, distribution and administration costs). They also usually look at net margin – operating profit after deducting finance costs. So there are many ways of expressing a ‘profit’.

More on banking and finance terms tomorrow, so please come back for more on what the meaning is of words like Gross margin.

Example of Gross margin in use?

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May 302021
 

The informal relationships and channels of communication that exist in an organization

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Apr 252021
 

The Global Financial Markets Association (GFMA) was established as a way to join together the common interests of financial institutions across the globe in response to the increasingly global nature of financial market regulation. See http://www.gfma.org/

GFMA’s mission is to develop policies and strategies for global policy issues in the financial markets that encourage sound regulation and effectively functioning markets, thereby promoting coordinated advocacy efforts across its partner associations.

The Association for Financial Markets in Europe (AFME), based in London and Brussels, is the European regional member of GFMA. The Asia Securities Industry & Financial Markets Association (ASIFMA), based in Hong Kong, is the Asian regional member of GFMA. The Securities Industry and Financial Markets Association (SIFMA), with offices in New York and Washington, D.C., is the U.S. regional member of GFMA.

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