Gross Profit Margin

Gross Profit/Net Sales

Gross margin is the money left after you have covered all the variable (not fixed) costs
associated with the sale of a product or service (such as wages, materials, etc.).
Gross margin ratio is a profitability ratio that measures how profitable a company can sell
its inventory.
Total amount of income your company keeps after paying the direct costs related to the
manufacturing of products sold.
How profitable your company is
High = strong net income, excess cash to spend, competitive edge, selling their inventory
at a higher profit percentage.
Investors
Now, if you really want to be surprised, think about the fact that Microsoft which earns
gross profit margins of 80.16% or $50.089 billion per year makes more net income than
Wal-Mart, which made $103.557 billion in gross profit with its 25.37% gross profit
margins.
The reason? Selling, general and administrative expenses. Wal-Mart requires a global
network of stores that need associates, electricity, running water, insurance, parking lots,
shelves, and more.

Operating Profit Margin

Operating Profit/Sales

how much revenues are left over after all the variable or operating costs have been paid.
Margin simple means you turn that into a percentage of the selling price.
Investors and creditors to see how businesses are supporting their operations.
A higher operating margin is more favorable compared with a lower ratio because this
shows that the company is making enough money from its ongoing operations to pay for
its variable costs as well as its fixed costs.