Sales are recorded as the total revenue from goods sold or services provided during the financial
year.
COGS (Cost of Goods Sold) is calculated as the costs directly related to the production of the
goods sold by the company. This typically includes the cost of the materials used in creating the
goods along with the direct labor costs used to produce the goods.
Formula for COGS: COGS = Opening Inventory + Purchases During the Period - Closing
Inventory
Gross Profit Margin is a measure of the financial health of a company's core business activities.
It's the percentage of sales revenue remaining after accounting for the COGS.
Formula for Gross Profit Margin: Gross Profit Margin = (Sales - COGS) / Sales X 100
Net Profit Margin shows how much of each dollar earned by the company is translated into
profits.
Formula for Net Profit Margin: Net Profit Margin = Net Income / Sales X 100
The Sales and COGS; the Gross Profit and Net Profit Margin are calculated as percentages.
For 2021:
Gross Profit Margin: ((4.5 - 2.7) / 4.5) X100 = 40%
If we're given the Net Profit Margin as 18%, then the Net Income would be: 4.5 X 0.18 = $0.81
billion
For 2022:
Gross Profit Margin: ((5.2 - 3.1) / 5.2) X 100 = 40%
Net Profit Margin: 5.2 X 0.183 = $0.952 billion (Net Income)
For 2023:
Gross Profit Margin: ((5.7 - 3.4) / 5.7) X 100 = 40%
Net Profit Margin: 5.7 X 0.193 = $1.1 billion (Net Income)
