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Flaw in illustration

There is a flaw in the illustration in question 3: 
It must be “Gross Profit” and not “Gross Margin”. 
A Gross Margin is a ratio or percentage, while Gross profit is a currency amount.

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Top answer
Deleted user
on Sep 16, 2023

Dear,

thanks for pointing this out. Normally, people tend to use gross margin and gross profit as synonyms.

However, as you rightly highlighted, gross margin and gross profit are theoretically two similar but different metrics

  • Gross Profit ($) = Revenue - COGS → Absolute value
  • Gross Margin (%) = Gross Profit / Revenue → Percentage value

Good catch!

24
Ian
Coach
on Sep 17, 2023
Top US BCG / MBB Coach - 5,000 sessions |Tech, Platinion, Big 4 | 9/9 personal interviews passed | 95% candidate success

Hi there,

Antonio is exactly right here.

Honestly, the terminology in business is quite confusing. Between net income, net profit, profit margin, gross margin, markup, etc. there's a lot to process.

I highly highly recommend leveraging investopedia to read up on this. Learn the formulas and the nuances of the terms and you'll be sure to not get confused during the case interview :)

on Sep 17, 2023
#1 rated McKinsey Coach | top MBB coach

Hi there!

Lots of useful answers below already.

Sharing with you a guide that contains all the most common terms (with definitions and formulas) that show up in consulting interviews.


Best,
Cristian

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