By Jack Perkins, founder at CFO Hub, which provides on-demand CFO, controller, accounting, and HR services.
Gross profit margin is one of the most crucial barometers of your company’s financial health and competitiveness within its industry—specifically, it helps you evaluate your production efficiency against competitors’.
GPM shows the money you made after paying the direct costs of running the business (i.e., the costs of goods sold). Typically, it’s shown as a percentage of net sales.
At the very least, a company’s gross profit margin should reach the point where revenues cover production costs. But this is only the minimum threshold business owners should target.