The income statement contains information about company sales, expenses, and net income. It also provides an overview of earnings and the number of shares outstanding used to calculate earnings per share (EPS). These are some of the most popular data points that analysts use to assess a company’s profitability.
Gross profit as a percent of sales is referred to as gross margin. It's calculated by dividing gross profit by sales. The gross profit margin would be 80% if gross profit is $80,000 and sales are $100,000. The higher the gross profit margin, the better. It indicates that a company is keeping a higher proportion of revenues as profit rather than using it to meet expenses.
Operating profit as a percentage of sales is referred to as operating margin. It's calculated by dividing operating profit by sales. The operating profit margin would be 60% if the operating profit is $60,000 and sales are $100,000.
