What is the gross profit margin?

	N
sales	20,000
cost of sales	10,000
operating expenses	2,500
expenses prepaid included in operating expenses	500

A. 100%
B. 50%
C. 40%
D. 30%

Correct Answer:

Option B – 50%

Explanation

Gross profit margin is a financial metric used to assess a company’s financial health and business model by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). Gross profit margin, also known as gross margin, is calculated by dividing gross profit by revenues. Also known as “gross margin.”.

Gross Margin is generally calculated as the selling price of an item, less the cost of goods sold.

As a percentage, it can be calculated as:

Gross Margin (%) = (Revenue – Cost of goods sold) / Revenue * 100

revenue = 20,000

cogs = 10,000

20,000 – 10,000 = 10000 /20000 X 100 = 50%