Profit Margins

Gross Profit Margin

GPM = Gross Profit / Sales = (Sales - COGS) / Sales

Net Profit Margin

NPM = Net Income / Sales

GPM only considers COGS. NPM accounts for all expenses, including OpEx, IntEx and taxes.

High GPMs and lower NPMs can be caused by a company improving efficiencies in direct production costs i.e COGS while experiencing increased OpEx, IntEx or taxes.