plinc business blog

Gross margin is an ambiguous phrase that expresses the relationship between gross profit and sales revenue. The ambiguity arises because it can be expressed in absolute terms:

Gross Margin = Revenue - Cost of Goods Sold

Or as the ratio of gross profit to sales revenue, usually in the form of a percentage:

Gross Margin percentage = 100 * (Revenue - Cost of Goods Sold) / Revenue

In everyday speech the word ‘percentage’ is sometimes omitted and this can create confusion… @

In finance, a futures contract is a standardized contract, traded on a futures exchange, to buy or sell a certain underlying instrument at a certain date in the future, at a pre-set price. The future date is called the delivery date or final settlement date. The pre-set price is called the futures price. The price of the underlying asset on the delivery date is called the settlement price. The futures price, normally, converges towards the settlement price on the delivery date… @

A call option is a financial contract between two parties, the buyer and the seller of this type of option. Often it is simply labeled a “call”. The buyer of the option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument (the underlying instrument) from the seller of the option at a certain time (the expiration date) for a certain price (the strike price). The seller (or “writer”) is obligated to sell the commodity or financial instrument should the buyer so decide. The buyer pays a fee (called a premium) for this right… @