1. Calculate the Gross Profit and Gross Profit Percentage for this year and last year, creating a small table, such as the following:

This Year

Last Year

Net Sales

$1,200

$1,400

Cost of Goods Sold

800

1,200

Gross Profit

400

200

Gross Profit Percentage

33%

14%

In the example above, sales decreased, gross profit increased, and the gross profit percentage increased. Therefore, sales are more profitable. We made 33 cents of gross profit on every dollar of sales this year, but only 14 cents of gross profit on every dollar of sales last year. Sales decreased, but sales are actually generating more profit overall, both as an absolute dollar value and as a percentage.