GROSS PROFIT MARGIN ON SALES (GPM) is one of the key performance indicators. The gross profit margin gives an indication on whether the average markup on goods and services is sufficient to cover expenses and make a profit. GPM shows the relationship between sales and the direct cost of products/services sold. It measures the ability of both to control costs and to pass along price increases through sales to customers. The gross profit margin should be stable over time. A persistent gradual decrease is likely to indicate that productivity needs to be increased to return profitability back to previous levels. Generally:
>40% = Indicates a sustainable competitive advantage
< 40% = Indicates competition may be eroding margins
< 20% = There is likely no sustainable competitive advantage
Formula: Gross Profit / Net Revenue
NON-EXPENDABLE PROPERTY is durable (e.g., equipment and furniture), lasting for a year or longer, and generally has a high dollar value. Non-expendable property must be accounted for throughout its useful life.
VALUE is a term that defines the worth of a thing. The term is usually preceded by the word, or words such as Fair" or "Fair Market", and it is usually defined in the document where it is found. Not all value for an item is the same, i.e. value is usually perceived.
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