Gross Profit Margin

This ratio indicates the percentage of revenue available to cover operating and other expenses. A higher ratio shows that the company has a competitive advantage in product costs. A higher ratio also tells us that the company has more money to pay operating expenses.

Operating Profit Margin

It indicates the percentage of revenue left over after paying all the operating expenses (Selling, General, and Administrative expenses). Operating profit margin increasing faster than gross margin indicates that indirect expenses control is increasing.

Net Profit Margin

This ratio includes both recurring and non-recurring components. It tells how well the company is managing its expenses relative to its net sales. Companies either try to earn more revenue by keeping the expenses constant or stable revenues by lowering the expenses to give a good net profit margin.