Week 4 Day 6 Action Items

Day 6

• [ ] Examine a sample profit margin analysis.
• [ ] Identify ways to maximize profitability in your business.

Sample Profit Margin Analysis

Total Revenue: $1,500,000 (Yearly)

Total Cost of Goods Sold (COGS): $600,000

Gross Profit: $900,000

Calculation of Profit Margins:

1. Gross Profit Margin:

• Formula: (Gross Profit / Total Revenue) * 100
• Calculation: ($900,000 / $1,500,000) * 100 = 60%
• Interpretation: The gross profit margin for the business is 60%.

2. Net Profit Margin:

• Formula: (Net Profit / Total Revenue) * 100
• Assuming Operating Expenses (including COGS): $700,000
• Net Profit Calculation: Total Revenue - Total Expenses = $1,500,000 - $700,000 = $800,000
• Calculation: ($800,000 / $1,500,000) * 100 = 53.33%