StocksResult
📝 Net Profit Margin vs Gross Profit Margin
💡 Net Profit Margin vs Gross Profit Margin
Let’s imagine Bunty runs a burger shop 🍔.
He sells delicious burgers for ₹1,00,000 in a month. But how much profit does he really make? 🤔
There are two types of profit margins to understand this:
🎯 1) Gross Profit Margin — “Profit after making the product” 🍞🍗🧀
👉 This tells how much money is left after paying ONLY for making burgers (like bun, patty, cheese, veggies, sauce etc.).
✔️ Gross Profit = Sales – Cost of Making the Product (COGS)
✔️ Does NOT include rent, electricity, staff salary etc.
🎨 Example:
✔️ Sales = ₹1,00,000
✔️ Cost of Ingredients (COGS) = ₹40,000
👉 Gross Profit = ₹60,000
✔️ Means Bunty made ₹60,000 by selling burgers — after paying only for raw material.
👉 Gross Profit Margin = ₹60,000 ÷ ₹1,00,000 × 100 = 60%
🎯 “For every ₹100 burger sold, ₹60 is left after paying for buns, cheese etc.”
🎯 2) Net Profit Margin — “Profit after everything is paid” 💡💸
👉 This tells how much money is left after paying for EVERYTHING — rent, electricity, staff salary, taxes, loan interest... all costs.
✔️ Net Profit = Sales – All Expenses (COGS + Rent + Salary + Tax + Interest + Others)
🎨 Example:
✔️ Sales = ₹1,00,000
✔️ Cost of Ingredients = ₹40,000
✔️ Other Expenses (Rent, Salary, Tax etc.) = ₹30,000
👉 Net Profit = ₹30,000
👉 Net Profit Margin = ₹30,000 ÷ ₹1,00,000 × 100 = 30%
🎯 “For every ₹100 sold, ₹30 is true profit in pocket after all payments!”
🤔 So what’s the difference?
Gross Profit Margin Net Profit Margin
💡 Only product making cost ignored everything else 💸 Everything included (all expenses)
🏭 Shows how good the business is at making & selling products 📊 Shows the final bottom-line profit
🔍 Important for manufacturers 🔑 Important for investors
(No table used here, this is text list 😄)
🏆 When High Gross Margin is GOOD?
✔️ Strong control over raw material cost 🧀🥦
✔️ Great pricing power 💰
⚠️ When High Gross but Low Net Margin is BAD?
❌ High rent
❌ Too many salaries
❌ Wastage of resources
❌ Heavy tax or loan interest
👉 "Making profit on products but losing money elsewhere!" 🚨
🎈 Funny Tip:
✔️ Gross Margin = Like knowing how much you earn after buying vegetables for cooking 🍅🥕
✔️ Net Margin = Like knowing what you saved after cooking, paying rent, light bill, gas bill, and maid salary! 🏠💡
🔑 In a Nutshell:
✔️ Gross Profit Margin = Profit after product cost
✔️ Net Profit Margin = Real final profit after ALL costs
✔️ Gross shows strength in making & selling goods.
✔️ Net shows true health of the entire business!
💡 “Great businesses keep both Gross and Net Margins healthy — like a burger with both tasty patty and fresh bun!” 🍔😄