Method of calculation
Gross profit margin
This ratio allows to estimate the relationship between the gross profit on sales and the net revenues from sales. Consequently it allows to estimate which part of the net revenues from sales is used to cover the costs of sold products, goods and materials (operating costs).
- The greater the ratio's value, the greater the sales profitability, since the costs of basic operating activities consume smaller part of the net revenues from sales.
- When assessing the changes in ratio's value over time (over few periods):