Gross Profit Margin Analysis Boosts Profit Explained

Gross Margin Analysis opens the door to understanding the complex interactions between Revenue, COGS (Cost of Goods Sold or Operating Expenses) and Gross Profit.  It can be hard to understand why (e.g.) Revenue is going up but Gross Profit is going down!  Gross Margin also lets you measure the operating efficiency of your business and points out which components of your COGS may be declining in efficiency.  Bottom line, an improving Gross Margin is a good sign for improving profitability in your business.  Yellow Belt

Overhead Margin Analysis Explained

Overhead Margin relates to Overhead Costs, which are the costs in your business that do not change directly with a change in your Revenue and/or a change in your Cost of Goods Sold (COGS).

They include such things as:

  • Rent, insurance.
  • Interest.
  • Salaries of permanent staff.
  • Administration costs in general; telephone, office costs.
  • Some elements of the sales process that are not directly related to your Sales Revenue.

These Overhead Costs tend to grow over time and may lead to inefficiencies in your business. This is due to activities no longer being relevant to your business but remain as a cost. 12Faces has several tools for helping to remove these “barnacles” that detract from your Operating Profit. Yellow Belt

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