1. What is Gross Profit Percentage?

Gross Profit Percentage (GP%) is a financial metric that shows what percentage of revenue exceeds the cost of goods sold (COGS). It measures how efficiently a company uses its resources to produce goods.

2. How Does the Calculator Work?

The calculator uses the Gross Profit Percentage formula:

Where:

• \( Revenue \) — Total sales income
• \( COGS \) — Cost of Goods Sold (direct costs of producing goods)

Explanation: The formula calculates the percentage of revenue that remains after accounting for the direct costs of producing goods.

3. Importance of Gross Profit Percentage

Details: GP% is crucial for assessing business profitability, pricing strategies, and operational efficiency. It helps compare performance across periods or with competitors.

4. Using the Calculator

Tips: Enter revenue and COGS in dollars. Both values must be positive, and revenue must be greater than zero.

5. Frequently Asked Questions (FAQ)

Q1: What's a good gross profit percentage?
A: This varies by industry, but generally 50-70% is good for most businesses. Service businesses often have higher percentages than manufacturers.

Q2: How is GP% different from gross profit?
A: Gross profit is an absolute dollar amount, while GP% shows the relationship between profit and revenue as a percentage.

Q3: Can GP% be negative?
A: Yes, if COGS exceeds revenue, indicating you're selling products for less than they cost to produce.

Q4: What's excluded from COGS?
A: Operating expenses like rent, utilities, and salaries are not included in COGS, only direct production costs.

Q5: How often should I calculate GP%?
A: Regularly (monthly or quarterly) to monitor business health and spot trends early.