Commercial margin: definition
Let's start at the beginning if I may. What is the commercial margin?
The commercial margin, also called gross margin, represents the difference between the selling price of a product and its purchase cost (i.e. the purchase price + costs relating to supply costs in particular).
It measures the gross profit a company makes on the america cell phone number list sale of its products before taking into account overheads, distribution and logistics costs, and other operating expenses.
The basic formula for calculating the sales margin:
Sales margin =
Sales revenue − Cost of goods sold (CAMS)
Margin is an indicator of sales profitability and allows us to judge the performance of the company's pricing strategy ( price policy) and purchasing.
This margin is expressed in absolute value (amount in euros) and as a percentage of turnover.
Methods of calculating the commercial margin
There are two main methods for calculating the commercial margin based on the available data and the needs of the company.
2.1. The simple method of calculating the commercial margin
The simple method of calculating the sales margin is simply to subtract the cost of goods sold (COGS) from the turnover made on these sales. This gives:
2.2. The method of calculating the percentage of the commercial margin
For a more detailed analysis, the sales margin can be expressed as a percentage. This allows us to compare the profitability of different products or services of an organization.
Commercial margin rate = (Commercial margin/Turnover) × 100
The commercial margin rate
Note that the trade margin rate is an indicator of a company's gross profitability.
A high rate means that the company is making a high gross profit relative to its turnover. It is important to monitor this rate to adjust sales strategies and purchasing based on financial objectives.