Aqid ERPMeaning
Profit margin (هامش الربح) is profit divided by revenue. Gross margin uses gross profit, revenue less cost of sales, and says what each riyal of sales leaves to cover overheads; operating margin uses operating profit; net margin uses the profit after zakat. A trading business might run a gross margin of 20 to 35 percent, a software or consulting business 60 or more; what matters is the trend and the comparison with peers, not the absolute.
Margin is not markup. Markup is the addition to cost: a product bought for 80 and sold for 100 carries a 25 percent markup and a 20 percent margin. Pricing by markup while reporting by margin is a common cause of a gross margin that comes out lower than the owner expects. Both are computed on prices before VAT, which is never revenue.
Also called: gross margin · net margin · markup · هامش الربح
Example
Al Noor's revenue is 860,000.00 and cost of sales 410,000.00, so gross profit is 450,000.00 and gross margin 52.3 percent. Operating profit of 123,000.00 is a 14.3 percent operating margin; net profit of 116,025.00 is a net margin of 13.5 percent.