Question

For a hospital, how to calculate Gross Profit Margin , Operating Profit Margin ,  Net Profit Margin ,  Profit after Taxes ?

Note:

There is no "Cost of good sold"and “Sales”。

There are only “Operating Revenues”, “Operating Expenses”, “Operating Income (Loss)”, “Nonoperating Revenues (Expenses)” , and “Net Position” given.

Answer 1

Gross Profit margin, operating profit margin, etc. can be calculated for any business entity, be it a manufacturing or a service industry. Hospital business comes under Service industry. These ratios can be calculated the same way, just that the terminology differs. Manufacturing entities use a profit & loss account/statement, whereas service entities use an income statement. Generally, manufacturing industry shows Sales in their profit & loss statement, whereas service industry shows revenue in their income statement.

For a Hospital,

Gross Profit margin = Gross Profit / Total Revenue

Operating profit margin = Operating profit / Total Revenue

Net profit margin = Net Profit / Total Revenue

Profit after taxes = Net profit - taxes

As we can see above, each parameter is same for calculation of profits in both the industries. The basics are the same.