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Gross Loss( 毛亏损 )

26 CFR § 1.61-3 - Gross income derived from business.

(a) In general. In a manufacturing, merchandising, or mining business, “gross income” means the total sales, less the cost of goods sold, plus any income from investments and from incidental or outside operations or sources. Gross income is determined without subtraction of depletion allowances based on a percentage of income to the extent that it exceeds cost depletion which may be required to be included in the amount of inventoriable costs as provided in § 1.471-11 and without subtraction of selling expenses, losses or other items not ordinarily used in computing costs of goods sold or amounts which are of a type for which a deduction would be disallowed under section 162 (c), (f), or (g) in the case of a business expense. The cost of goods sold should be determined in accordance with the method of accounting consistently used by the taxpayer. Thus, for example, an amount cannot be taken into account in the computation of cost of goods sold any earlier than the taxable year in which economic performance occurs with respect to the amount (see § 1.446-1(c)(1)(ii)).

(b) State contracts. The profit from a contract with a State or political subdivision thereof must be included in gross income. If warrants are issued by a city, town, or other political subdivision of a State, and are accepted by the contractor in payment for public work done, the fair market value of such warrants should be returned as income. If, upon conversion of the warrants into cash, the contractor does not receive and cannot recover the full value of the warrants so returned, he may deduct any loss sustained from his gross income for the year in which the warrants are so converted. If, however, he realizes more than the value of the warrants so returned, he must include the excess in his gross income for the year in which realized.

[T.D. 6500, 25 FR 11402, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, Gross Loss( 毛亏损 ) as amended by T.D. 7207, 37 FR 20767, Oct. 5, 1972; T.D. 7285, 38 FR 26184, Sept. 19, 1973; T.D. 8408, 57 FR 12419, Apr. 10, 1992]

Gross profit (GP) ratio

Gross profit ratio (GP ratio) is a profitability ratio that shows the relationship between gross profit and total net sales revenue. It is a popular tool to evaluate the operational performance of the business . The ratio is computed by dividing the gross profit figure by net sales.

Formula:

The following formula/equation is used to compute gross profit ratio:

gross-profit-ratio-img1

When gross profit ratio is expressed in percentage form, it is known as gross profit margin or gross profit percentage. The formula of gross profit margin or percentage is given below:

gross-profit-ratio-img2

The basic components of the formula of gross profit ratio (GP ratio) are gross profit and net sales. Gross profit is equal to net sales minus cost of goods sold. Net sales are equal to total gross sales less returns inwards and discount allowed. The information about gross Gross Loss( 毛亏损 ) profit and net sales is normally available from income statement of the company.

Example:

The following data relates to a small trading company. Compute the gross profit ratio (GP ratio) of the company.

  • Gross sales: $1,000,000
  • Sales returns: $90,000
  • Cost of goods sold: $675,000

Solution:

With the help of above information, we can compute the gross profit ratio as follows:

= (235,000 * / 910,000 ** )
= 0.2582 or 25.82%

* Gross profit = Net sales – Cost of goods sold
= $910,000 – $675,000
= $235,000

** Net sales = Gross sales – Sales returns
= $1,000,000 – $90,000
= $910,000

The GP ratio is 25.82%. It means the company may reduce the selling price of its products by 25.82% without incurring any loss.

Significance and interpretation:Gross Loss( 毛亏损 )

Gross profit is very important for any business. It should be sufficient to cover all expenses and provide for profit.

There is no norm or standard to interpret gross profit ratio (GP ratio). Generally, a higher ratio is considered better.

The ratio can be used to test the business condition by comparing it with past years’ ratio and with the ratio of other companies in the industry. A consistent improvement in gross profit ratio over the past years is the indication of continuous improvement. When the ratio is compared with that of others in the industry, the analyst must see whether they use the Gross Loss( 毛亏损 ) same accounting systems and practices.

IKEA: gross profit worldwide 2009-2021

In the financial year 2021, the global gross Gross Loss( 毛亏损 ) profit of IKEA amounted to about 12.88 billion euros, up from approximately 11.73 billion recorded Gross Loss( 毛亏损 ) a year earlier.

IKEA's unique selling proposition

IKEA is an internationally known home furnishing retailer with the vision of 'creating a better everyday life for the many people'. The company's products are flat-pack, ready to be assembled by the consumer. This allows a reduction in costs and packaging. Low prices are Gross Loss( 毛亏损 ) the cornerstone of the IKEA business idea and the company always tries to do things as efficiently and cost-effective as possible. The business’ innovations include new materials that contribute more to a sustainable environment and are less costly or using the newest ways of packaging, handling and transporting materials.

IKEA's brand value

As of 2021, is not only IKEA the most valuable furniture retailer brand in the world, it is also among the leading retail brands globally, valued at nearly 18 billion U.S. dollars. The business Gross Loss( 毛亏损 ) operates 445 stores and is present in the world's major markets. In 2020, there were more than 800 million customer visits to IKEA stores, and nearly four billion visits in the company's Gross Loss( 毛亏损 ) online webpage IKEA.com.

Gross Exposure

Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle. He received his masters in journalism from the London College of Communication. Daniel is an expert in corporate finance and equity investing as well as podcast and video production.

Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win. Gordon is a Chartered Market Technician (CMT). He is also a member of CMT Association.

What is Gross Exposure?

Gross exposure refers to the absolute level of a fund's investments. It takes into account the value of both a fund’s long positions and short positions and can be expressed either in dollar or percentage terms. Gross exposure is a measure that indicates total exposure to financial markets, thus providing an insight into the amount at risk that investors are taking on. The higher the gross exposure, the bigger the potential loss (or gain).

Understanding Gross Exposure

Gross exposure is an especially relevant metric in the context of hedge funds, institutional investors, and other traders, who can short and long assets and use leverage to amplify returns. These types of investors are sometimes more sophisticated and have greater resources than regular, long-only investors.

As an example, hedge fund A has $200 million in capital. It deploys $150 million in long positions and $50 million in short positions. The fund's gross exposure is thus: $150 million + $50 million = $200 million.

Since gross exposure equals capital in this case, gross exposure as a percentage of capital is 100%. If Gross Loss( 毛亏损 ) Gross Loss( 毛亏损 ) gross exposure exceeds 100%, it means the fund is using leverage — in other words, it is borrowing money to amplify returns. Alternatively, gross exposure below 100% indicates a portion of the portfolio is invested in cash.

Key Takeaways

  • Gross exposure measures an investment fund's total exposure to financial markets, including Gross Loss( 毛亏损 ) long and short positions and use of leverage.
  • A higher gross exposure means that the fund has a greater amount at stake in the markets.
  • Gross exposure is an especially relevant metric in the context of hedge funds, institutional investors, and other traders, who can short and long assets and use leverage to amplify returns.

Gross Exposure Vs. Net Exposure

The exposure of an investment fund can also be measured in net terms. Net exposure equals the value of long positions, minus the value of short Gross Loss( 毛亏损 ) positions.

For example, the net exposure of hedge fund A is $100 million. This is calculated by subtracting $50 million, the amount of capital tied up in short positions, from the $150 million of long holdings.

If net exposure is the same as gross exposure, it means the fund only has long positions. On the other hand, if net exposure is zero, it means the percentage invested in long positions equals investment in short positions, also known as a market neutral strategy.

A fund has a net long exposure if the percentage amount invested in long positions exceeds the percentage amount invested in short position. Likewise, it has a net short position if short positions exceed long positions.

Assume hedge fund B also has $200 million in capital but uses a significant amount of leverage. As a result, it has $350 million in long positions and $150 million in short positions. The gross exposure in this case is thus $500 million (i.e. $350 million + $150 million), while the net exposure is Gross Loss( 毛亏损 ) $200 million (i.e. $350 - $150 million).

Gross exposure as a percentage of capital for hedge fund B = $500 million ÷ $200 million = 250%. Fund B's higher gross exposure means Gross Loss( 毛亏损 ) that it has a greater amount at stake in the markets than A. Fund B's use of leverage will magnify losses, as well as profits.

Special Considerations

Gross exposure is generally used as the basis Gross Loss( 毛亏损 ) for calculating a fund's management fees, since it takes into account total exposure of investment decisions Gross Loss( 毛亏损 ) on both the long and short side. Portfolio managers combined decisions will have direct consequences on the performance of a fund and thus distributions to its investors.

An additional method of calculating exposure is a beta-adjusted exposure, also used for investment funds or portfolios. This is computed by taking the weighted average exposure of a portfolio of investments, where the weight is defined as the beta of each individual security.