gross profit margin

• What does the gross profit margin represent?

  It shows the proportion of revenue that exceeds the cost of goods sold.
• How does gross profit margin measure business efficiency?

  It measures how efficiently a business is generating profit from its sales after covering direct costs.
• What is the formula for calculating gross profit margin?

  $\text{Gross Profit Margin} =$$\left( \frac{\text{Gross Profit}}{\text{Sales Revenue}} \right) \times 100$
• What does a higher gross profit margin indicate?

  It indicates better efficiency in producing or buying goods.
• Why is gross profit margin useful for comparing businesses?

  It is useful for comparing profitability between similar businesses or industries.
• What is the significance of gross profit margin in business?

  • Indicates efficiency in generating profit from sales
  • Reflects the proportion of revenue exceeding direct costs
  • Useful for comparing profitability across similar businesses
• What are the two options for a business to improve its gross profit margin?

  Increase the price or cut the cost of buying/making the product
• When is raising the price sensible for a business?

  When the product’s brand is strong enough to retain most customers at a higher price level
• What is one way to cut the cost of buying products?

  Negotiating a cheaper price from current suppliers
• How can a business encourage suppliers to offer lower prices?

  By setting up a bidding war between suppliers
• What is one method to redesign a product to cut costs?

  Making it easier to manufacture or using cheaper materials
• What are the strategies for improving gross profit margin?

  • Increase the price
  • Ensure brand strength to retain customers
  • Cut the cost of buying/making the product
  • Negotiate cheaper prices from suppliers
  • Set up bidding wars among suppliers
  • Redesign products for easier manufacturing or use cheaper materials