[lbo-talk] corporate profits?

[Gar Lipow]

On Fri, Dec 18, 2009 at 9:50 AM, Mark Rickling <mrickling at gmail.com> wrote:
>
> Out of the office so don't have any datasets in front of me, but 1-2%
> seems low. Might be a good figure for retail, but certainly in
> hospitals, the industry I follow, a more typical profit margin these
> days is 5%+.

Sure retail, especially grocery is an exception. Very fast turnover of
inventory means low  margin can translate to a a high return on
investment..I was deliberately citing extreme cases - mainstream
grocery chains as a low margin exception, and electron microscopes as
high margins. Low  margin in grocery still leads to high rate of
return on capital. High margin in electron microscopes still leads to
low or moderate rate of return on capital.

In terms of terminology.

"http://www.investorwords.com/2250/gross_profit_margin.html


>gross profit margin


>What remains from sales after a company pays out the cost of goods sold. To obtain gross profit margin, divide gross profit by sales. Gross profit margin is expressed as a percentage.For example, if a company receives $25,000 in sales and its cost of goods sold were $20,000, the gross profit margin would be equal to $25,000 minus $20,000, divided by $25,000, or 20%. Basically, 20% gross profit margin means that for every dollar generated in sales, the company has 20 cents left over to cover basic operating costs and profit.

What we normally think of as profit margin or profit rate is NET
profit margin. And I agree that net margin is more useful. But gross
profit margin is a good rough and ready indicator that can be useful
to compare firms within the same industry.