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Thread: GPM

  1. #1
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    UK
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    GPM

    Please excuse me if my terminology is poor, I received an F in Maths at school, everything I have learnt thereafter has been through requirement and sheer personal determination! Calculating a Gross Profit margin is pretty straight forward, I can do that;

    Commission = (Revenue * 0.15)

    Cost of Goods += Commission
    Cost of Goods += Shipping
    Cost of Goods += Purchase

    Gross Profit Margin (GPM) = ((Revenue - Cogs) / Revenue))

    But I find myself in a pickle, unable to form an approach to the problem or even formulate a title or string for the question I need to ask! The problem is multi-currency, how do I approach when the Revenue, Commission and Shipping is in Euro's, but the Purchase Price is in Sterling?

    Commission = €(Revenue * 0.15)

    Cost of Goods += €Commission
    Cost of Goods += €Shipping
    Cost of Goods += £Purchase

    Gross Profit Margin (GPM) = I have no clue.

    I could convert the £Purchase price to Euros, then process and I think this might be the best approach, but is it the most accurate? What else do you as maths pros think I should consider?

    Many thanks in advance for you help and direction

    Stuart
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  2. #2
    MHF Contributor

    Joined
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    Re: GPM

    The "source of error" is in converting from one currency to another so you want to do that as few times as possible. If two of the values is in "Euros" and only one in "Pounds Sterling" then the best thing to do is to convert the "Pounds Sterling" to "Euros". You don't say what currency you want the result in. If in "Euros" you don't have to do anything more. If in "Pounds Sterling" you will need to convert the answer to "Pounds Sterling". In that last case, you need to do two conversions, the same as if you converted the two "Euro" values to "Pounds Sterling" to begin with.
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  3. #3
    Newbie
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    Re: GPM

    Great, thats what I thought, thanks for the help.

    Stu
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