Turn Over, Net Profit, Gross

[D3SIGNER]

Hi All,
Can someone confirm this is correct.

Turn Over: Money Earned (Excluding cost of materials/travel etc)
Net Profit: Money Earned (minus cost of materials/travel)
Gross: Total taking for the year (including material material/travel)

 

[businessfunding]

I think I'm a bit confused by your terminology but it goes something like this;

turnover = total value of sales

Minus variable costs - those costs directly incurred in providing goods or serice

Gives net profit

Deducts all other costs (fixed costs) - the general costs of running the business

Leaves net profit.

 

[David Griffiths]

I think I'm a bit confused by your terminology but it goes something like this;

turnover = total value of sales

Minus variable costs - those costs directly incurred in providing goods or serice

Gives net profit

Deducts all other costs (fixed costs) - the general costs of running the business

Leaves net profit.

The line in bold should read "Gives gross profit"

 

[Core List]

Just an addon to this thread as I thought it would suit. (As I often get confused with these 2 terms is Margin Verse Markup.

This is a good definition which cleared it up for me.

How to calculate markup percentage
By definition, the markup percentage calculation is cost X markup percentage, and then add that to the original unit cost to arrive at the sales price.

For example, if a product costs $100, the selling price with a 25% markup would be $125:

Gross Profit Margin = Sales Price - Unit Cost = $125 - $100 = $25.

Markup Percentage = Gross Profit Margin/Unit Cost = $25/$100 = 25%.

Sales Price = Cost X Markup Percentage + Cost = $100 X 25% + $100 = $125.

How to calculate gross margin percentage
Gross margin defined is Gross Profit/Sales Price. In this example, the gross margin is $25. This results in a 20% gross margin percentage:

Gross Margin Percentage = Gross Profit/Sales Price = $25/$125 = 20%.

Not quite the "margin percentage" we were looking for. So, how do we determine the selling price given a desired gross margin? It's all in the inverse…of the gross margin formula, that is. By simply dividing the cost of the product or service by the inverse of the gross margin equation, you will arrive at the selling price needed to achieve the desired gross margin percentage.

For example, if a 25% gross margin percentage is desired, the selling price would be $133.33 and the markup rate would be 33.3%:

Sales Price = Unit Cost/(1 - Gross Margin Percentage) = $100/(1 - .25) = $133.33

Markup Percentage = (Sales Price - Unit Cost)/Unit Cost = ($133.33 - $100)/$100 = 33.3%