HOME ABOUT US ARTICLES BLOG FAQ CONTACT US
HOME ABOUT US ARTICLES BLOG FAQ CONTACT US
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software

Articles Blog

Business Financials – Profit & Loss and all about Profit Margins

images/ sign.GIFimages/profit-loss-diagram.jpgA business reports how it is going monthly and yearly, on the Profit & Loss Statement (or P&L) or Income Statement, and from this statement we can calculate Business Health Ratios that give insight to the financial health of the business.

The P&L shows all the sales for a period less cost of goods (if you sell product) leaving gross profit, then from that all the expenses (operating or overheads like rent, wages etc) leaving  the operating profit (not always reported), then from that less any non-regular income and expenses, gives us the final net profit.

To summarise, there are three main levels of profit or profit margins and they are calculated as follows:

Gross profit (after cost of sales deducted from sales/revenue), calculated by Gross Profit / Sales (ie GP divided by sales);

Operating profit (sometimes given = after expenses deducted) also known as Pre-tax profit (before tax and other non-regular items) calculate by Operating Profit / Sales (ie OP divided by sales), and so on; and

Net profit (Final, after tax and other non-regular expenses and income).

Note that “profit”, “earnings” and even “income” are all used interchangeably, and mean the same thing.

When the term "margin" is stated, it can apply to the absolute dollar number for a given profit level and/or the number as a percentage of sales/revenues.

The net profit margin commonly uses the percentage calculation to provide a measure of a company's profitability on a historical basis (3-5 years) and in comparison to peer companies and industry benchmarks. The margin is the amount of profit (at the gross, operating, pre-tax or net level) as a percent of the sales generated.

The observation of profits over years can detect consistency or positive/negative trends in a company's earnings. Positive profit margin analysis translates into positive investment quality. To a large degree, it is the quality, and growth, of a company's earnings that drive its stock price, as well as earnings per share and Return on Equity.

Get Your FREE “Avoid these GST mistakes”

There is 18 that the Tax Office see regularly – Get them right!

Need help? Not sure? Call for FREE 30min Advice / Strategy session today!

Call 0407 361 596 Aust

 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~

Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software

CATEGORIES


CUSTOMER LOGIN





Forgot your password?
Forgot your username?

YOUR CART

The cart is empty

Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software

CATEGORIES


CUSTOMER LOGIN





Forgot your password?
Forgot your username?

YOUR CART

The cart is empty

Accounting Software Australia, MYOB, Quickbooks, accounts software, bookkeeping software
© Account Keeping Plus 2020   |   Website Design by Best Web Site Design Melbourne    |   Admin