Profit Margin = Net Income / Sales Revenue

Sales

– COGS

Gross Profit

Gross Profit Margin = Gross Profit / Sales Revenue

Gross Profit Ratio is the same as Gross Profit Margin

Beginning Inventory

+ Net Purchases

– Ending Inventory

COGS

Beginning Inventory

+ Net Purchases

– COGS

Ending Inventory

Beginning Inventory

+ Net Purchases

Goods Available for Sale (Some professors care about this... some don't)

Sales Revenue

– Sales Returns and Allowances

– Sales Discounts

Net Sales

Purchases

– Purchase Returns and Allowances

– Purchase Discounts

Net Purchases

+ Transportation In

Cost of Goods Purchased