Gross Profit Vs. Gross Margin Gross Profit is the profit that a company makes after deducting the cost of goods sold (COGS) from its revenue. COGS includes the direct costs of producing or acquiring the goods that a company sells, such as raw materials, labor costs, and manufacturing overheads. Gross Profit is calculated by subtracting …
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Gross Profit Vs. Net Profit Gross Profit is the profit that a company makes after deducting the cost of goods sold (COGS) from its revenue. COGS includes the direct costs of producing or acquiring the goods that a company sells, such as raw materials, labor costs, and manufacturing overheads. Gross Profit is calculated by subtracting …
Contribution Margin Vs. Gross Margin Contribution Margin The contribution margin ratio is the difference between a company’s sales and variable expenses, expressed as a percentage. The total margin generated by an entity represents the total earnings available to pay for fixed expenses and generate a profit. When used on an individual unit sale, the ratio …
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EBIT Vs. EBITDA EBIT (Earnings Before Interest and Taxes) is a measure of a company’s profitability that indicates how much profit it generated from its operations before taking into account interest expenses and taxes. It is calculated by subtracting operating expenses (such as selling, general, and administrative expenses) from a company’s revenue. EBITDA (Earnings Before …
Profit Before Tax (PBT) is the total profit a company has earned before accounting for income taxes. PBT is calculated by subtracting all the operating expenses and cost of goods sold (COGS) from a company’s total revenue. Profit After Tax (PAT) is the total profit a company has earned after accounting for all taxes. This …
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Cost of Production refers to the total cost of manufacturing a product or service. It includes direct costs such as raw materials, labor costs, and factory overheads, as well as indirect costs such as rent, utilities, and depreciation. Cost of Production = Cost of Raw Materials + Cost of Direct Labor + Cost of Direct …
The break-even point or Break-even analysis can be defined as a point where total costs (expenses) and total sales (revenue) are equal. Break-even point can be described as a point where there is no net profit or loss. The firm just “breaks even.” Any company which wants to make abnormal profit, desires to have a …
The Profit Volume (P/V) Ratio is the measurement of the rate of change of profit due to a change in volume of sales. It is one of the important ratios for computing profitability as it indicates contribution earned with respect to sales. P/V ratio establishes the relationship between contribution and sales. It is importance for …
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Debt Service Coverage Ratio (DSCR) is a coverage ratios, calculated for known the cash profit availability to repay the principal and interest. Essentially, DSCR is calculated when a company takes a loan from bank and other financial institutions. This ratio suggests the capability of cash profits to meet the repayment of the financial loan including …
Earnings per share (EPS) is calculated as a company’s profit (Profit after Tax-Preferred dividend) divided by the outstanding shares. The resulting number serves as an indicator of a company’s profitability. It is common for a company to report EPS that is adjusted for extraordinary items and potential share dilution. The higher a company’s EPS, the …
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