Gross margin
In Arabic هامش الربح الإجمالي
Gross margin is gross profit, revenue less the cost of goods sold, shown as a share of revenue: how much of each sale is left to cover expenses.
In plain words
Gross profit is an amount; gross margin is the same figure as a percentage of revenue, which lets one period, product or customer be compared with another. For a distributor working on thin margins, a fall of one or two points can wipe out the year’s profit.
Gross margin is worked out from net revenue, after discounts and returns, and the cost of the goods actually sold in the period. It differs from markup, which divides the same profit by cost rather than by revenue and always gives a larger percentage.
The common mistake is reading margin from list prices. Discounts, free goods and returns all come out of revenue, so the margin a sales team expects at list price is rarely the margin the income statement shows.
- Net revenue
- SAR 480,000.00
- Cost of goods sold
- SAR 408,000.00
- Gross profit
- SAR 72,000.00
- Gross margin
- 15%
In Axon Suite
How Axon Suite handles it
In Axon Suite the income statement reads from the posted ledger and shows revenue, cost of goods sold and expenses, with gross profit and net income beneath.
Feature
Trial balance, P&L and balance sheet
The trial balance, income statement and balance sheet read straight from the posted ledger. Each parent account totals the accounts beneath it, and the balance sheet tells you whether it balances.
Open: Trial balance, P&L and balance sheet