Glossary

Customer Acquisition Cost (CAC) is the cost a company incurs to acquire a new customer. It includes expenses related to marketing, sales, and other efforts to attract and convert a customer. This metric is critical in evaluating the efficiency of a company’s sales process and is calculated as:

CAC = Total Sales and Marketing Costs / Number of New Customers Acquired

EBIT stands for Earnings Before Interest and Taxes. It is a measure of a company’s profitability that excludes interest and income tax expenses. EBIT is also known as operating income because it focuses solely on a company’s ability to generate earnings from operations. This metric is used by analysts to assess a company’s operational efficiency and is calculated as:

EBIT = Revenue – Operating Expenses (excluding interest and taxes)

Gross Margin is a profitability metric that represents the percentage of revenue remaining after accounting for the cost of goods sold (COGS). It helps companies understand their production efficiency. It is calculated as:

Gross Margin = (Revenue – COGS) / Revenue x 100

Net Margin, also known as Net Profit Margin, is the percentage of revenue remaining after all expenses, including taxes and interest, have been deducted. It shows the overall profitability of a company. Calculated as:

Net Margin = Net Income / Revenue x 100

Operating Margin measures the proportion of revenue left after covering operating expenses. It indicates how much profit a company makes per dollar of sales after paying for variable costs of production. Calculated as:

Operating Margin = Operating Income / Revenue x 100