Here are the formulas for each of the financial metrics you've mentioned:
1. Cost of Sales (or Cost of Goods Sold - COGS)
Cost of Sales represents the direct costs attributable to the production of the goods sold by a company.
\[ \text{Cost of Sales} = \text{Opening Inventory} + \text{Purchases} - \text{Closing Inventory} \]
2. Sales Turnover
Sales Turnover, also known as revenue or sales, is the total income generated by the sale of goods or services.
\[ \text{Sales Turnover} = \text{Number of Units Sold} \times \text{Selling Price per Unit} \]
3. Gross Profit
Gross Profit is calculated by subtracting the Cost of Sales from Sales Turnover.
\[ \text{Gross Profit} = \text{Sales Turnover} - \text{Cost of Sales} \]
4. Mark-up
Mark-up refers to the amount added to the cost price of goods to cover overhead and profit. It can be expressed as a percentage of the cost price.
\[ \text{Mark-up} = \left( \frac{\text{Selling Price} - \text{Cost Price}}{\text{Cost Price}} \right) \times 100 \]
5. Margin
Margin, often referred to as profit margin, is the difference between sales and the cost of goods sold, stated as a percentage of sales.
\[ \text{Margin} = \left( \frac{\text{Gross Profit}}{\text{Sales Turnover}} \right) \times 100 \]
6. Net Profit
Net Profit is the actual profit after all expenses, taxes, and costs have been subtracted from total revenue. It can be calculated as:
\[ \text{Net Profit} = \text{Gross Profit} - \text{Total Operating Expenses} - \text{Taxes} \]
Summary of Formulas
- Cost of Sales: \( \text{Opening Inventory} + \text{Purchases} - \text{Closing Inventory} \)
- Sales Turnover: \( \text{Number of Units Sold} \times \text{Selling Price per Unit} \)
- Gross Profit: \( \text{Sales Turnover} - \text{Cost of Sales} \)
- Mark-up: \( \left( \frac{\text{Selling Price} - \text{Cost Price}}{\text{Cost Price}} \right) \times 100 \)
- Margin: \( \left( \frac{\text{Gross Profit}}{\text{Sales Turnover}} \right) \times 100 \)
- Net Profit: \( \text{Gross Profit} - \text{Total Operating Expenses} - \text{Taxes} \)
These formulas can help you analyze the financial performance of a business effectively.
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