How to calculate gross profit margin

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Remember the business sense question I have posted last week? Indeed many people don’t know how to answer the question. Not 99%, but at least 80% based on the response on our Facebook page. So I think this post is nice to cover some basic business sense. More details at wikiHow here.

How to calculate gross profit marginHow to calculate gross profit margin 2

With that let’s look at the the business sense question again. To answer what was the loss, the question can be simplified into two parts. We first look at revenue. How much were Sara’s “revenue” out of that pair of shoes? Well, Sara got a fake $50 bill from the buyer Betty, and she also received $50 from her neighbor Nancy. So she got $50 plus a fake bill if it counts.

Then what were her costs? She paid $30 for the shoes, give $30 change to the buyer Betty, and redeemed $50 to her neighbor Nancy. So Sara spent $110 on the shoes.

Now use the spending to minus the income to get the total loss, which is $60, assuming the fake bill is worthless.

Another way to think about it is to assume Sara didn’t get the fake bill, how much would she lose? $10, right? Now that she received the $50 fake bill, so her lost became $60.

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