Gross Margin vs Net Profit (Newbie here)

Discussion in 'Technical Queries' started by docajay, Aug 1, 2018.

  1. docajay

    docajay

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    Good night world of accountants,
    I am writing up a business proposal and I am having a dilemma here regarding Gross vs net profit. I have calculated two possible scenarios under the plan.
    1. The net profit is what is left over after both Expenses and Loan repayments have been made.
    2. The net profit is what is left over not including the loan repayments only expenses. In this scenario the loan repayment is added to direct cost of sales reducing gross margin.

    Or are both my scenarios completely wrong?

    Thanks for any advice that can be offered in rectifying this issue.
     

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    docajay, Aug 1, 2018
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  2. docajay

    suiathon

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    Is it loan interest expense or revenue? You add that figure to Net Margin, so it makes me believe it is a Revenue. I'd clarify that row header and use negative signs for subtractions. Also, are you subtracting out your Expenses in calculating Net Profit?

    Gross margin = Revenue less COGS; Gross Margin % = Gross Margin over Total Sales
    Net Profit = Gross Margin less Operating and Non-Operating expenses; Net Profit % = Net profit over Total Sales
     
    suiathon, Aug 6, 2018
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