Profitability

Revenue says how much the store sold. Profitability says how much of it the store kept. The two can move in opposite directions: a category that sells a lot at a thin margin can grow revenue while profit stands still, and a wave of returns can turn a good month into an average one.

In this chapter you work from the order lines up. Gross margin takes the cost of the goods off net sales. Contribution margin also takes off the refunds. Then you compare what each category brings in sales with what it brings in margin, check whether 20% of the products really make 80% of the sales, price the returns, and meet the trap that catches most margin reports: the overall margin moving because the mix moved, not because any category got better or worse.

House rules, as in every chapter of this track: only booked orders count (completed or refunded), lines with a quantity of 0 or less are data errors and are left out, and line net = quantity × unit price × (1 − discount_pct / 100). Costs come from products.unit_cost, which is missing on 9 products: their lines are excluded from every margin, and a good report says so. The boss is the category P&L Laura Bennett takes to the quarterly review.