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Essay text:
Gross profit is arrived at by deducting cost of sales from revenues in the case of manufacturing and trading companies. In the case of a service company, the costs incurred for rendering the services are deducted from revenues.The ratio gives the gross margin enjoyed by the products sold by the company and is an indicator of the pricing power the company enjoys. However, in the case of multi-product or diversified companies this ratio may not give a clear picture.
Operating profit to sales
The ratio presents the operating profits as a percentage of operating revenues. Operating profits are profits before interest and taxes...
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Common topics in this essay:
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