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Presented By: Ubaid Azam Wardag Babar Mustafa Muhammad Usman

Gross profit analysis represents an accounting process where a company examines the revenue generated from selling goods and services compared to the costs involved. The analysis involves looking at three key elements: product price, sales volume, and product costs. By analyzing these factors, management can understand changes in sales prices, sales volumes, and costs that impact profitability. Conducting gross profit analysis helps companies determine the profitability of individual products and services and identify areas for improved performance.

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338 views13 pages

Presented By: Ubaid Azam Wardag Babar Mustafa Muhammad Usman

Gross profit analysis represents an accounting process where a company examines the revenue generated from selling goods and services compared to the costs involved. The analysis involves looking at three key elements: product price, sales volume, and product costs. By analyzing these factors, management can understand changes in sales prices, sales volumes, and costs that impact profitability. Conducting gross profit analysis helps companies determine the profitability of individual products and services and identify areas for improved performance.

Uploaded by

Shahid Ashraf
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Presented By: Ubaid Azam Wardag Babar Mustafa Muhammad Usman

Gross profit analysis definition Elements of GP analysis Why we conduct GP analysis? Explanation of GP analysis Comprehensive example Benefits of GP analysis Summing up

Gross profit analysis represents an accounting process where a company looks at the money made from selling goods and services. The basic gross profit formula is sales revenue less the cost of goods sold.

By gross profit analysis management knows the following things: Changes in sale price of products. Changes in volume sold. (no of units sold) (Type of product sold) Change in cost elements.

Analysis for gross profit allows a company to determine the profitability of selling certain goods and services. Each piece plays a critical role in gross profit analysis

These three elements are included in this process: Product price Sales volume Product cost

Product price represents the amount a company charges consumers for goods or services. Product price is a result of two main factors

Consumer demand

Supply of goods in industry

In term of gross profit analysis: Setting price too low reduces profitability Setting price higher than average market price result in consumer moves towards a substitute.

Sales volume has a close relationship to a company sales price. Gross profit analysis dictates that change in actual goods or services sold and increase in product offerings or product lines will affect gross profit.

The final piece of gross profit analysis is the cost of goods sold. Most companies analyze that they can control inventory costs to some degree. Example: Manufacturers can purchase cheaper inputs to produce goods for sale. Retailers can also control inventory costs as finding less expensive goods to sell in stores should lead to higher gross profits.

Comprehensive Example

Analyze how efficiently a company is using its resources to generate profits. It spot out weak performance.

Dare to ask questions.and yes!!!!! Questions are guaranteed but answers arent Thank Yhew

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