Profitability ratios

• What does the GP margin do?

  Enables a business to work out the GP on goods sold after deducting their cost.
• What is GP markup?

  The percentage added to the cost to create the selling price.
• GP margin formula

  GP/Revenue x 100
• GP markup formula

  GP/cost of sales x 100
• What is the NP margin?

  Ratio that measures the profit made by the business after all expenses have been deducted
• NP margin formula

  NP/Revenue x 100
• What is ROCE?

  A financial ratio that is used to measure the profitability of a company & the efficiency with which it uses its capital.
• ROCE formula

  NP/capital employed x 100