Gross Margin and Net Margin in Sales.

-

What is Gross Margin and Net Margin in Sales?

Let us start without beating around the bush.

You buy (or manufacture) a product at Rs 8/-.

You sell it at Rs 10/-.

Gross profit margin= Sales revenue minus cost of goods sold (COGS) divided by sales revenue multiplied by 100= (Rs10/- Rs.8/)*100/10= 2*100/10= 20%.

It is because gross margin or gross profit margin is always expressed in % terms.

However to sell that product you incur Rs 1/- as sales expense ( shop rent,electricity bill,shopping bag cost i.e paper bag cost,sales person salary).

(For a manufacturer cost of goods sold (COGS) is taken into account which includes raw material cost and fixed costs like plant ,machinery, manpower cost,working capital cost etc.)

So your sales expenses to sell that product = Rs 1/-.

So your net profit margin (NPM) on that product = Gross profit margin in amount minus sales expense in amount divided by sales revenue multiplied by 100= 2–1/10= 10%.

NPM is always expressed in % terms.

Hope it helps.

Sales Gurukul- a YouTube channel about sales


Let us start without beating around the bush.

You buy (or manufacture) a product at Rs 8/-.

You sell it at Rs 10/-.

Gross profit margin= Sales revenue minus cost of goods sold (COGS) divided by sales revenue multiplied by 100= (Rs10/- Rs.8/)*100/10= 2*100/10= 20%.

It is because gross margin or gross profit margin is always expressed in % terms.

However to sell that product you incur Rs 1/- as sales expense ( shop rent,electricity bill,shopping bag cost i.e paper bag cost,sales person salary).

(For a manufacturer cost of goods sold (COGS) is taken into account which includes raw material cost and fixed costs like plant ,machinery, manpower cost,working capital cost etc.)

So your sales expenses to sell that product = Rs 1/-.

So your net profit margin (NPM) on that product = Gross profit margin in amount minus sales expense in amount divided by sales revenue multiplied by 100= 2–1/10= 10%.

NPM is always expressed in % terms.

Hope it helps.

Sales Gurukul- a YouTube channel about sales

Comments

Post a Comment

Popular posts from this blog

Difference Between Product Sales and Market Sales.

-
Image
Today we will not only discuss What is Product Sales and What is market sales bit also the difference between these two terms. The product sales refer to sale of these products by the company to its channel partners e.g franchises, distributors, stockists etc. Please note that here the product has reached only the warehouses of the channel partners of the company and not the end customer. And market sales   refers to sale of company products by its channel partners in market. Further sale by franchise,or distributor or stockist to their own customers or end consumers will be called market sales. In this case market sales of company products is real sales as the products have moved from the warehouse of the channel partners to the market. Hope it is of help to you. Mritunjaya Malhan To get comprehensive knowledge about FMCG sales, buy our book on Flipkart by clicking this link now : https://bit.ly/3kkXCDT (C)2019 All rights reserved.
Read more

How To Travel Better on Sales Tours

-
"How To Travel Better on Sales Tours"  Most of working lives of sales people are spent in travelling. To meet channel partners and customers, sales people have to visit different locations to sell or promote their products/services. If as sales people you utilize your travelling time productively then it can help you increase your skills and also use this travel time to distress yourselves. Another major requirement of sales profession is that of staying outside home ,away from friends and family members in hotels.  Hotels become second homes of most of sales people as here again major part of their working month is spent staying in hotels, and hotels are hotels and not homes. Sales people have to accept whatever services are offered by the hotels. This also helps in developing a lot of patience and tolerance in sales people regarding the food quality or room quality or the kind of services provided by different hotels. Today we will explore some of the ...
Read more

What is Marketing Role in FMCG Industry?

-
Image
Dear Friends, You all must have heard the word marketing time and again and you must have wondered as to what marketing is. Most people confuse marketing with sales. But both are different My answer is based on marketing and sales function in FMCG, OTC and FMCD industries. Marketing: Image: feedough Marketing is focused on generating awareness of company's products in the mind of consumers. Marketing achieves this objective by planning and executing right communication strategies ( right communication in the right channel to ensure that the communication reaches the target audience at the least cost) to reach the right target audience. Marketing function is focused on running campaigns or promotion strategies to engender a desire to buy and/or experience company's products/services . Marketing function is also responsible for doing marketing research to come up with right products (First P) in the right packaging (Second P) to ensure it reaches more number of cu...
Read more