P&L Accounting Margins

Written by Charley Blewett

Published: January 12, 2018

Jan 12, 2018

Here are 2 Income Statement (P&L) Accounting Margins

For Small Business Owners

Profit & Loss (P&L) Statement Margins:

Gross Profit Margin (GPM) = Gross Profit (GP) / Revenue

GPM is a metric telling a business what the ratio of Revenue minus COGS (Cost of Good Sold) divided by revenue. An important retail, manufacturing, and contracting accounting metric. It is used historically for backward-looking analysis and for forward looking projections; shows how much better, over time (or worse) a company is selling its products. Managers periodically review this metric to track the effects of the sales efforts.

Net Profit Margin (NPM) = Net Profit (NP) / Revenue

NPM is the metric telling a business what ratio of GP minus Expenses (Net Profit) divided by Revenue. How much does it cost to make your sales, ie: advertisement, utilities, salaries, Etc.

For more information or to answer small business accounting questions, please give Manuel or Charles a call at C&M Bookkeeping, LLC. Thanks and have a great day of success!


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