Which of the following best illustrates the concept of gross profit margin?

The concept of gross profit margin is best illustrated by the calculation of total revenue minus cost of goods sold. Gross profit margin measures the efficiency of a company in managing its production costs relative to its total revenue from sales. It specifically focuses on the profitability of the core business activities, excluding other expenses like operating costs, interest, and taxes.

Calculating gross profit involves taking the total revenue — the total money a company earns from sales — and subtracting the cost of goods sold, which represents the direct costs attributable to the production of the goods sold. This calculation gives insight into how much profit a company makes for each dollar of sales, before accounting for operating expenses and other costs, thereby providing a clearer picture of its operational efficiency.

Understanding gross profit margin is crucial for evaluating a company's financial health, as it reflects how well a company can control its production costs relative to its sales and is a vital metric used by investors and analysts to assess overall profitability.