📝 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!” 🍔😄