Bruttoavance

Bruttoavance is a financial metric used in accounting and business management to measure the profitability of goods or services sold before fixed costs and other operating expenses are taken into account. In many Scandinavian contexts, bruttoavance corresponds to what is commonly called gross margin: the difference between net sales revenue and the cost of goods sold (COGS).

Calculation and variants: Absolute bruttoavance equals Net sales minus COGS. The corresponding rate, bruttoavance percentage or gross margin percentage, is (Net sales minus COGS) divided by Net sales. A related measure is markup on cost, defined as (Net sales minus COGS) divided by COGS. COGS typically includes direct material costs, direct labor, and other direct production costs; net sales are gross sales minus returns, allowances, and discounts.

Interpretation and use: Bruttoavance indicates how much revenue remains to cover fixed costs and generate profit after accounting for direct production costs. It is used for pricing decisions, product-mix analysis, and inventory management. It does not reflect overall profitability, since it excludes selling, general and administrative expenses, taxes, and financing costs.

Variations and caveats: The exact definition of COGS and what is included in bruttoavance can vary by country, industry, and company. Some organizations include distribution or fulfillment costs in COGS, while others treat them as operating expenses. When comparing bruttoavance across firms or periods, consistent definitions are essential.

Example: If a product sells for 1000 and COGS is 700, bruttoavance is 300 (30% of net sales). If net sales for a period are 6000 and COGS are 4200, bruttoavance is 1800 (30% margin).