2004 2005
Sales 800 800
COGS 500 500
Operating expenses 160 140
Income taxes 44 80
From this info how do you figure out the gross profit, operating profit and net profit margins for 2005?

Gross Profit = Sales minus COGS

Operating profit is also known as EBIT(Earnings Before Interest & Taxes) = Sales minus COGS minus operating expenses

Profit margin = Net Income divided by Sales

Net Income = Sales minus COGS minus operating expenses minus taxes

So Gross Profit would be 800 - 500 = 300 for 2005, Operating profit would be 800 - 300 - 140= 360 ?
to Find Net Profit Margin
800 - 500 - 140 - 80 = 80 80/800 = 0.1??
I don't think I understand as my answers do not match the ones in the text book. Would you be able to show me how to do the gross profit for 2005? That may help me understand. Thanks

There may be other information that was provided that you are missing such as sales returns and allowances or sales discounts.

based on the information provided 2005 Sales of 800 minus 2005 COGS of 500 = Gross Profit of 300

If you are talking about the gross profit margin then you divide the above number of 300 by Sales of 800, which equals the Gross Profit Margin of 37.5%

Operating Profit = Sales of 800 minus Cogs of 500 minus operating expenses of 140 = Operating Profit of 160

For operating profit and you mean operating profit margin, take your operating profit and divide by sales, which equals the Operating Profit Margin of 20%.

Your profit margin for 2005 is 10%

Thanks now I get it.