It is a measure of a company's success and helps the company's management as well as prospective investors determine the level of sales, profits and margins of a company.
The profit margin is also known as the contribution margin and the higher it is for a product, the more potential it is. Business margins, in general, are used to determine the value of additional units or sales in this case. They are critical in determining pricing and in making decisions. Sales margins are key factors in many business decisions such as budgeting and forecasting. All managers strive to at least approximate their profit margins , although the way they do so differs from bulk sms cambodia company to company. Compared to other companies of the same size in the same industry, they strive to maintain a strong sales margin which is vital for a company's long-term survival and growth.
Formulas to calculate the Commercial Margin
Sales margins are calculated for specific time periods such as a month, quarter, year, bi-year, or annual. Companies keep these time frames constant for all calculations to facilitate comparisons.
In calculating the sales margin for a product line, the cost of goods is subtracted from net sales and sales returns are added to this figure to give the gross profit margin for the product. Selling expenses are then subtracted from the gross profit margin to now show the profits of a product without the application of administrative overhead. Gross sales are then used to divide this figure to give the sales margin.
Trade Margin Formula 1:
Sales margin = [gross profit margin - cost of sales] / gross sales
Trade Margin Formula 2:
Gross profit margin = Net sales - Selling expenses + any sales returns
The cost of sales of a product is the cost associated with running the sales department. These costs include sales labor, customer service, advertising and promotions, shipping costs, warranty, travel, entertainment, and expense reimbursement.
For a company that deals in manufacturing or assembly, then included in the cost of sales is the cost of the constituent parts or raw materials.
