Margins

Question 1

CM (Contribution Margin)

Answer 1

incremental operating margin resulting from a sale of a product or service, by deducting variable costs from sales in volume. Effective tool used to understant the impact of sales volume variance on profitability

Question 2

GM (Gross Margin)

Answer 2

Derived by deducting costs of good sold (COGS) and costs of service sold (COSS) from sales revenues. They include both variable and base costs

Question 3

OM (Operating Margin)

Answer 3

Derived by deducting operating expenses from sales. Can also be obtain by deducting base costs from Contribution Margin, or by deducting SG&A from Gross Margin. Tool used to analyze operating efficiency, since it excludes the impact of other income.

Question 4

Operating Profit

Answer 4

Derived by adding other income (loss) and deducting non controlling (minority) interests from operating margin. Measure of how ongoing business operations are performing