SALES MARGIN CALCULATION

I have asked this question to my seniors and have been asked this question by my colleagues. I thought I can share my knowledge on the same in this forum, so that it can serve the people looking for knowledge in fundamentals of Retail :

What is Sales Margin ?

It is the gross profit acquired from sales after VAT, in short terms it is earnings before interest, taxes (other taxes incurred by organisation apart from taxes on sale of goods), depreciation, amortisation (EBIDTA) and OPEX (operational expenses)

At times retailers do add their OPEX and other over head expenses as a percentage to the landed cost of the product , thereby leading to higher UNIT COST. So the margin in this case will be NET MARGIN i.e. sales margin after Tax

Sales Margin is always represented in percentage (%)

Below formula will help you understand the calculation of NET MARGIN :

NET MARGIN % = { (NET SALES - COGS) / (NET SALES) } x 100

Where NET SALES = Selling Retail / (1+(vat rate/100))

COGS is cost of goods sold i.e. the unit cost at which the product is being sold