Gross Profit Ratio
Categories: Accounting, Metrics
You can figure out the Gross Profit Ratio with this handy equation:
(Revenue – COGs) ÷ Revenue
Why would we want to figure out the Gross Profit Ratio? Well, it's not as gross as the name suggests. It can also tell you how financially healthy your business is. It shows how much money you have left over to pay your bills once your costs are accounted for.
It can also show how stable your business is. Usually, if your gross profit ratio is all over the place month to month, that might be a sign. A bad one...