> Hi Mike. What you describe is return on investment. Gross Profit Rate
> is actually very close to to what Shag is describing. (Revenue - Cost
> of Goods Sold)/Revenue. Because the Gross Profit Rate is not used
> consistently it sometimes excludes fixed expenses. (When it includes
> fixed expenses [and it can], then it is exactly the number Shag
> described).
Hey Gar, I have to disagree on this. That's the profit margin, and it's only useful for comparison when firms have the same capital-output ratio, or when you're talking about the same firm at different points in time over which its capital-output ratio has remained constant. The rate of profit in any useful economic sense is a rate of return on capital, however defined. Although like you say the profit margin might be a rough-and-ready indicator for firms in the same industry.
Mike