Most entrepreneurs in Dubai, especially SPANCOM TECHNOLOGIES, may not have a solid background in finance. However, accounting firms in Dubai recommend you have a basic understanding of the key concepts of financial accounting which will enable you to make better business decisions. Having a better understanding of how your business measures financial performance is essential to taking steps to add more value to your daily business activities.
Yeah, accounting can be scary for newbie entrepreneurs. To help such entrepreneurs we have prepared a list of the top financial metrics entrepreneurs must understand and monitor.
Gross Profit Margin
Gross profit margin is a critical financial metric used by analysts and stakeholders to check a company’s financial health. It is a profitability ratio used to measure the percentage of revenue left after subtracting the cost of goods sold. The cost of goods sold implies the direct cost of production excluding operating expenses, interest, or taxes. In short, gross profit margin measures the profitability of a product or item range without accounting for overheads.
Net Profit Margin
Net profit margin, another key profitability ratio, gives insights into the percentage of revenue and other income left after subtracting all costs for the business. It includes costs of goods sold, operating expenses, interest, and taxes. Net profit margin differs from gross profit margin in that the former takes into account not only the cost of goods sold but all other related expenses.
