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What is gross, net and operating profit margin and how to calculate it in Excel

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What is gross, net and operating profit margin and how to calculate it in Excel

It is natural for every company or business to have a daily management system for the profits obtained from the sales of a product. But it is very true that there are terms and data that can help facilitate this work, for this we will talk about the profit margin.

What is the profit margin?

The profit margin is the inequality between the amount of sale of an item or service, fixed and variable expenses. This in-so is related to the processes of commercialization and maintenance of a company or company.

Why is profit margin important?

For a company to function well internally, it is important to take into account everything that the profit margin implies. Knowing the difference in the price of an item and its elements involved will allow having data that will help to visualize if the applied strategy is profitable.

Taking the profit margin into account will allow a company, whether a sole proprietorship or corporate, to understand whether the distributors are the right ones to boost resources. By having a profit margin, you will be able to answer questions that arise as a project progresses, and they are these:

  1. Does the sale that is made satisfy the needs of those who make up a company or team?
  2. Is there a way to minimize the expenses that are made in the production, without affecting the quality of the product?
  3. Is the marketing strategy that is implemented to generate more profits functional and practical?

What is gross, net, and operating margin?

Next, we will show you a brief explanation in the form of an outline of what a net, gross, and operating profit margin is.

What is gross, net and operating profit margin and how to calculate it in Excel

The gross profit margin: It refers to what is earned after deducting the final price of the direct and indirect costs in the production of an item.

The net margin: It is the one that is acquired once the fixed expenses such as water, electricity, services among others that are carried out around the business are subtracted.

Operating profit margin: This is a financial percentage that measures the performance of a company, through the functions acquired before the payment of taxes and interests.

Calculate Profit Margin in Excel How?

  • Open the Excel program and create a new spreadsheet where you will use the columns ‘Revenue’, ‘Cost of Production’, ‘Profit’, and ‘Profit Margin’.
  • In the column labeled ‘Income’, you will enter the price of one of the items on offer.
  • In the column ‘Cost of production,’ you will add the total cost that involves labor plus services.
  • Identify the gross profit, this will be updated in the column ‘Profit’. Here you will enter a calculation formula that subtracts the cost of production data from the data in the Income column, the formula is = B2-C2.
  • To calculate the profit margin or percentage, you must change the formula mentioned above and it would be D2 / B2 * 100.
  • To keep a more accurate control, make a column to record the data of the number of items you sell per day. To do this, use the following formula = B2 * (plus the price of the item), where B2 corresponds to the number of products sold, and the amount you place after is the amount that the product is canceled.
  • Copy the formulation down, in order to have the totals for each item, at the same time select the addition formula and the boxes that correspond to the same data.
What is gross, net and operating profit margin and how to calculate it in Excel
  • Next, in another Excel sheet within the same file that you already have, you will create columns that have the following data ‘Fixed Expenses’, ‘Variable Expenses’, ‘Total Expenses’, and another called ‘Profit’.
  • For this new sheet to be updated exactly like the previous one, you just have to press the equal sign (=) next to the box where the total profit for the month is and press ‘Enter’.
  • To calculate the net profit, you just have to apply the formula that we have explained to you in previous steps.
  • Finally, you will write the formula that responds to the percentage margin of net profit.

We have successfully concluded this article, we hope it will be very useful and although it is a bit tedious, it is important for your company.

MS Excel

Determining Lowest and Highest Values ​​in Microsoft Excel

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Determining Lowest and Highest Values ​​in Microsoft Excel

Determining the lowest and highest values ​​requires a special formula or function that you can do with Microsoft Excel.

Determining the highest value can be done easily when there is very little data, but what about when there is a lot of data?

For that you need an Excel formula.

How to? Come on, follow this tutorial in full.

HOW TO DETERMINE THE LOWEST AND HIGHEST VALUE

To do this, the formula you can use is MAX and MIN.

As the name implies, MAX is to find the highest value, while MIN is to find the lowest value.

Meanwhile, for writing the formula, the highest value is MAX(Number1; [Number2]; …)

Number is the range of numbers for which you want to know the highest value.

Finding Lowest Value

Now, to find the lowest value you can use the formula MIN(Number1; [Number2]; …).

As usual number is a range of numbers, or the same when you look for the previous highest value.

How, very easy isn’t it? Although it looks complicated, Excel formulas will really make things easier for you.

That’s all and good luck.

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MS Excel

How to Use Automatic Ranking Formulas in Excel

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How to Use Automatic Ranking Formulas in Excel

The formula for finding rankings in Excel is also available for those of you who want to rank in a group.

This one formula is a formula that is quite widely used, especially in the field of education.

Well, here’s an Excel formula tutorial to find rankings.

RANKING FORMULAS IN EXCEL

There are several formulas you can use that basically have the same function for finding rankings.

And the first formula you can use is = RANK(Number;Reference;[order]).

The order in the formula is the number 0 or 1 as a ranking reference.

When you want to sort the value in descending or descending order, fill it with 0 or empty, while when you want to give the value ascending then fill it with the number 1.

But you also need to know that the formula will also give the same rank when there are the same values.

To overcome this you can use this one formula.

RANK.AVG Rumus formula

The usage is still the same, only the formula is different which becomes RANK.AVG(Number; Reference; [order])

And when you apply it and there is the same value, it will produce an average ranking of that value.

So, for an assessment, this formula is the most appropriate.

Well, if you look at the example, a value of 70 gets a rating of 7.5 while a value of 75 gets a rating of 5.5.

That’s how the ranking formula in Excel works.

That’s all and good luck.

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MS Excel

How to Calculate Workdays with Excel Formulas

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How to Calculate Workdays with Excel Formulas

Calculating weekdays will be very effective when you use the easiest formula in Microsoft Excel.

Most people are lazy to use Excel for their daily needs, even though this software is very useful.

Then what about the formula for finding the working day? It’s really easy. Here’s the full tutorial.

HOW TO CALCULATE WORKING DAYS

You can do this with the NETWORKDAYS formula which only counts weekdays, without weekends.

But you also need to know that the weekends here are Saturday and Sunday.

For example, if you want to determine the weekend with another day, then there is a different formula which I will discuss later.

The formula for writing is =NETWORKDAYS(Start_Date; End_Date, [Holiday_Day])

For more details, consider the following image.

How to Calculate Workdays with Excel Formulas

In this example, the number of effective working days is 87 days, where Saturday and Sunday are not included.

NETWORKDAYS.ITL

Well, for this formula you can determine the time off or weekend as needed.

The formula for writing is =NETWORKDAYS.INTL(Start_Date; End_Date; [Weekend_End]; [Holiday_Holiday])

The difference in this formula is that [weekends] are used to exclude and treat as weekdays.

If you do not fill it in, it will be considered as the previous formula.

You can also use a holiday code with a seven-character text string consisting of a combination of the text numbers 1 and 0 to represent Monday-Sunday.

So what happens is the number 1 represents holidays while the number 0 for workdays.

For example, on weekends or holidays Saturday and Sunday, the string code you are using is 0000011.

As for working days only Monday, Tuesday and Thursday or Wednesday, Friday, Saturday and Sunday off, the code used is 0010111.

That’s all and good luck.

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