Q. Calculate the gross margin percentage?
Calculate the gross margin percentage by using the following formula
Grossmargin percentage = Grossmargin/Net sales
To show the use of this ratio considers the following information from the 2000 Annual Report of Abercrombie & Fitch.
($ millions) 2000 1999 1998
Revenues $ 1,238.6 $ 1,030.9 $ 805.2
Gross profit 509.4 450.4 331.4
Gross profit (margin)
Percentage $509.5/$1,238.6 = 41.13% $450.4/$1,030.9=43.69% $331.4/$805.2= 1.16%
Abercrombie's gross margin held at a relatively high 41-43 percent over those three years. You must now understand the distinction between accounting for a service company and a merchandising company. The next section persist the discussion of merchandise inventory carried by merchandising companies.