How does gross profit margin differ from operating profit margin?
Asked 3 years ago
I understand that they are both ways of measuring a store's or company's profitability and the production of goods for sale, but I am struggling to understand the difference. I am assuming they both have something to do with expenses directly related to production costs. If that's the case, then how does that differ from including overhead expenses?
Kole Kline
Sunday, October 03, 2021
Well, both profits are used to measure the profit of a company. While gross profit is the profit after the direct expenses, operating profit, as the name suggests, is the profit a company makes after paying all operating expenses. Both of these profit margins have completely two different formulas to make an accurate calculation.
Jolina Regin
Saturday, September 03, 2022
Gross profit margin deals with the direct costs thag are involved in the production of products e.g: direct materials, and direct labor. It shows how well a company generates revenue from the direct costs.
While operating profit margin includes all other expenses used to run the operations of the business like rent, utilities, and administrattion costs.
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