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gross profit
Subject Detailed: Universal formula to calculate negative and positve gross
profit margin What is the correct financial reporting protocol for reporting negative gross profit margin (i.e., GP%) on a line item basis in spreadsheets? In seeking a universal formula to address postive and negative gross profit margin, I considered the following, which would apply to both positive and negative revenue. Formula =ABS(Revenue - COGS)/Revenue Example A Revenue = $100.00 COGS = $90.00 Gross Profit = $10.00 Rev - COGS Absolute Value = $10.00 Gross Profit Margin = 10.0% Example B Revenue = ($100.00) COGS = $90.00 Gross Profit = ($190.00) Rev - COGS Absolute Value = $190.00 Gross Profit Margin = -190.0% Example C Revenue = ($1,000.00) COGS = $90.00 Gross Profit = ($1,090.00) Rev - COGS Absolute Value = $1,090.00 Gross Profit Margin = -109.0% The lower gross profit margin percent on a greater disparity between revenue (i.e., negative revenue and COGS) may be misleading. However, I confirmed that my HP 12C calculator generates the same results. If the calculated gross profit margin is misleading and not in the best interest to show, what is would be the best acronym/nomenclature to incorporate into a logic statement indicating that the calculated value is "not meaningful?" |
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