Gross Profit Margin Ratio $RELIANCE What is Gross Profit? Gross Profit Margin Ratio is a profitability ratio that measures how much gross profit a company earns from every ₹100 of sales after deducting the cost of goods sold (COGS). Sales minus the cost of raw materials used to make the product. It does not include other expenses like rent, salaries, or electricity. Formula: (Gross Profit ÷ Sales) × 100 Example: Sales = ₹500,000 Cost of Raw Materials = ₹300,000 Gross Profit = ₹500,000 - ₹300,000 = ₹200,000 Calculation = (2,00,000 ÷ 5,00,000) × 100 = 40% Interpretation: This means after paying for the raw materials, the company keeps 40 paise as profit from every ₹1 of sales. This is the money left to pay for salaries, rent, marketing, and interest. If this number is low (like 10%), it means the company has very thin margins and any small increase in raw material prices will destroy the business. If it is high (like 60%), the company has a strong pricing power.

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