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Profit margin is the difference between revenues and expenses. High turn-over causes a decrease in profit margins for many reasons.
The more turnover a company has, the more time and money they must invest (spend, which = and expense) in hiring and training new employees. Whether recruiting employees is done in-house, or outsourced, i.e. through a head-hunting agency, it is a costly component of doing business.
The higher up the position needing filled is to the organization, i.e. Management, CEO, etc, the more costly the expense.
In the U.S., the cost of recruiting a white collar professional, is typically about 20-30% of the salary for the position being filled.
There is also a learning curve associated with hiring new people. They won't be as productive as tenured people whom they may be replacing, as such, when productivity drops, the company spend more time and money trying to offset this drop either by having other employees pick up the slack, which may mean more they need to pay more labor dollars because employees are working longer hours.
High turn-over can also be an indication of low morale. Low morale can also lead to lower productivity, lower productivity results in increased expenses, which helps to result in a lower profit margin.
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What is a high profit margin?
A high profit margin is a good indication that a business is doing well, and has financial stability. This also shows that the company has good control over its costs in relation to its income.
Profit margin ratio?
Profit margin is a ratio of probability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every ringgit of sales a company actually keeps in earnings. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its cost compare to its competitors.
A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors?
Yes, companies with more profit margin are good at managing their cost. The variable cost associated with the product is low, which allows them to see more profit.
Profit margin and turn over ratios vary from one another what industry characteristic account for these variations?
Profit margin and turn over ratios vary from one industry to another The above said statement is true. Profit margin A ratio of profitability calculated as net income divided by revenues, or net profits divided by sales. It measures how much out of every dollar of sales a company actually keeps in earnings. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales. Looking at the earnings of a company often doesn't tell the entire story. Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. For instance, if a company has costs that have increased at a greater rate than sales, it leads to a lower profit margin. This is an indication that costs need to be under better control. Imagine a company has a net income of $10 million from sales of $100 million, giving it a profit margin of 10% ($10 million/$100 million). If in the next year net income rose to $15 million on sales of $200 million, its profit margin would fall to 7.5%. So while the company increased its net income, it has done so with diminishing profit margins. Turn over ratio A measure of the number of times a company's inventory is replaced during a given time period. Turnover ratio is calculated as cost of goods sold divided by average inventory during the time period. A high turnover ratio is a sign that the company is producing and selling its goods or services very quickly. In the case of mutual funds, the percentage of a fund's assets that have changed over the course of a given time period, usually a year. Turnover ratio for a mutual fund is calculated by dividing the average assets during the period by the lesser of the value of purchases and the value of sales during the same period. Mutual funds with higher turnover ratios tend to have higher expenses. Profit margin and Turn over ratios vary depending on the Company's Policy strategies and the Technology they are using. For example in Automobile sectors, the Profit margin and turn over ratios depends on the output, yield of the product they are manufacturing. This output & yield requires highly skilled professionals & technicians. The company is offering some highly salaried technicians or professionals. In this case, the high output results in high profit and the highly salaried persons with high technology results in low turn over ratios. In many of the small scale and medium scale industry, they usually prefer to have low salaried employees with the same skills getting the same output and yield with less technology. In case of IT fields, the Man power turn over ratio plays a major role in determining the companies Profit margin and Turnover ratios. In most of the IT companies Man power turn over ratio is very high compared to the other industries. This is because, they are focussing on the Project based Man power. They had to offer high salary for the experienced candidates even if the project gives them a low profit margin. Instead, they planned to have a fresher or a trainee to complete the project with low salary. This increases the profit margin and the turn over ratio but they are facing high Man power turn over ratio.
What is the excess of net sales over cost of merchandise sold during the period?
gross profit (margin)
What is margin money on letter of credit?
Margin money on a letter of credit is the part of the interest rate that is over the adjustment-index rate. It is the part that is retained as profit by the one doing the lending.
What is meant by the term contribution margin ratio?
The term contribution margin ratio is the percentage of contribution over total revenue. It is used in cost-volume-profit analysis, a form of management accounting.
The term used to describe the excess of gross profit over direct expense is?
The term used to describe the excess of gross profit over direct expense is gross margin. This is the percentage by which the profits exceedÊthe production costs.Ê
What if Gross profit margin decreases over the period?
You need to decrease costs in other areas in order to arrive at your planned GMROI
How much will profits increase for every unit sold over the break-even point?
All units sold above the break even point will be a profit equal to the contribution margin.
Why are profit a prerequisite to any business activityincluding?
Since no business is for charity, profit is a prerequisite for any business. Excepting for NGO and philanthropic organisations, the whole business world is being motivated by the ultimate goal of maximizing profit margin. This propels them to further expansion of business, acquiring or switching over to new business or so on.
What are the problems of vegetable business?
Vegetable is a perishable commodity. There are many problems related to collection, transportation and marketing of this commodity. At times over production brings the cost down and the margin of profit also affected.
