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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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!
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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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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 :)
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