Video Transcript: Gross Margin Percentage
Hello and welcome back now we're going to demonstrate a gross margin percentage for you to arrive at your gross margin percentage is going to be the gross margin divided by your net sales. As an example, we're going to use the 2000 annual report of Abercrombie and Fitch, as you can see, their gross profit margin is their revenues divided by or their gross profit divided by their revenues for 41.13% for the year 2000 and then night in 1999 they had a 43 point 69% gross profit margin, and then a 41.16% in 1998 and each year you can see that well, in 1999 their profit went up, and then it started declining again. So this is what, this is, a very important tool to help businesses see what is going on. As far as, Are we making a profit? Are we not making a profit? So with Ambercrombie's gross margin, it held at a rather high 41 to 43% over those three years. You should know. You should now understand the distinction between accounting for a service company and a merchandising company. And the next chapter continues the discussion of merchandise inventory carried by merchandising companies. Thank you.