Gross Profit Margin shows the profit which an entity earns from the sale of its inventory and/ or services. It measures the percentage remaining of each dollar of net sales before expenses are paid. This is a very significant ratio for retailers such as Cool Movers, especially during times of inflationary prices. If the management of the company does not raise prices when the cost of sales is rising, the gross profit will be eroded.
Cool Movers’ gross profit has fluctuated somewhat, dipping to $5,241,045 in 2012 from $5,490,619 in 2011 before raising to $6,111,058. As a result, the gross profit margin has been relatively flat over the last three years with a marginal decline to 20% in 2012 versus 22% reported for both 2011 and 2013. The absence of growth in this area is largely due to the fact that the cost of goods sold has increased, thereby cancelling out the increase in sales.
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The higher the company’s net income as a percentage of sales (NIPS) is the better, as it is generally indicative of profitability. This ratio is often used to measure a company’s success with respect to earnings on sales, that is, the profit found in every dollar of sales. What would be considered a “good” NIPS margin will vary from industry to industry, so that where a margin of 1% might be acceptable in some quarters, in other a margin of 15% might be considered relatively low, as might be the case for a retail business such as Cool