EM3504 - Recalculating Profits: Business Models: Communication
It is easy to talk at cross purposes about gross profit rates or margins. There are many expressions in common use and some trades have their own. The same word may even have different meanings. For instance, 바카라 사이트˜margin바카라 사이트™ may be a cash margin, a percentage margin on cost, or a percentage margin on sales. It is always vital to ensure that all parties to any discussion or correspondence are talking about the same thing.
Within the Department and within the accountancy profession two expressions do have a restricted meaning.
바카라 사이트˜Gross profit rate바카라 사이트™ will denote either
- the gross profit of a business as a whole expressed as a percentage of total sales
- the difference between the cost and sale price of an item expressed as a percentage of its sale price.
바카라 사이트˜Rate of mark-up바카라 사이트™ will denote either
- the gross profit of a business as a whole expressed as a percentage of cost of goods sold or the difference between cost and sale price of an item expressed as a percentage of its cost.
A business will normally have only one gross profit rate (namely, that for the business as a whole) derived possibly from dozens or even hundreds of different 바카라 사이트˜mark-ups바카라 사이트™ on individual lines.
Many traders will be familiar with the prevailing rate of gross profit in their line of business, and will have come across margins and mark-up rates. Where a taxpayer talks confidently and unambiguously, the discussion should take place in his or her terms. If the taxpayer is not confident in the subject, it is important to explain each step in detail. It is usually better to talk in cash terms related to the business rather than in ratios or percentages.