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Business Monitoring Idea – 2

November 16th, 2010 · 1 Comment

Any business where the gross margin is 50% or less needs to be monitored daily. Let me explain.

Gross margin is the revenue minus the cost of goods sold. If it costs Rs 3 to buy a widget, and the selling price is Rs 5, then the gross margin is  Rs 2, or 40% (2/5). Such businesses need to be monitored daily for variations in either the input costs or selling prices. Errors in purchase or sale can have a disproportionate impact on profitability.

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1 response so far ↓

  • 1 Hemant // Nov 16, 2010 at 9:13 pm

    Is it applied to stock trader as well?

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