Abstract
The gross profit margin ratio measures the profitability (or gross profit margin) that is generated from each dollar of sales. Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. In that respect, Lego Group increased its Gross profit margin between 2004 and 2005. This ratio shows us that the company has a net income of DKK 0.58 for each corona of sales. This is a rather high number compared to the rest of the sector.
The situation seemed to improve in 2005 and there was an operating profit with a positive profit margin ratio. This means that the Lego Group makes DKK 0.06 for every corona of sales. However, this figure is very low compared to the sector average. It shows that Lego has high variable costs that weigh on the company's profitability.
