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Arch Coal Inc (NYSE:ACI)
Gross Profit
$379 Mil (TTM As of Dec. 2013)

Arch Coal Inc's gross profit for the three months ended in Dec. 2013 was $51 Mil. Arch Coal Inc's gross profit for the trailing twelve months (TTM) ended in Dec. 2013 was $379 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Arch Coal Inc's gross profit for the three months ended in Dec. 2013 was $51 Mil. Arch Coal Inc's revenue for the three months ended in Dec. 2013 was $719 Mil. Therefore, Arch Coal Inc's Gross Margin for the quarter that ended in Dec. 2013 was 7.08%.

Arch Coal Inc had a gross margin of 7.08% for the quarter that ended in Dec. 2013 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Arch Coal Inc was 26.81%. The lowest was 4.14%. And the median was 21.47%.

Warning Sign:

Arch Coal Inc gross margin has been in long term decline. The average rate of decline per year is -12.8%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Arch Coal Inc's Gross Profit for the fiscal year that ended in Dec. 2013 is calculated as

Gross Profit (A: Dec. 2013 )=Revenue - Cost of Goods Sold
=3014.357 - 2663.136
=351

Arch Coal Inc's Gross Profit for the quarter that ended in Dec. 2013 is calculated as

Gross Profit (Q: Dec. 2013 )=Revenue - Cost of Goods Sold
=719.386 - 668.483
=51

Arch Coal Inc Gross Profit for the trailing twelve months (TTM) ended in Dec. 2013 was 114.929 (Mar. 2013 ) + 110.134 (Jun. 2013 ) + 102.557 (Sep. 2013 ) + 50.903 (Dec. 2013 ) = $379 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Arch Coal Inc's Gross Margin for the quarter that ended in Dec. 2013 is calculated as

Gross Margin (Q: Dec. 2013 )=Gross Profit (Q: Dec. 2013 ) / Revenue (Q: Dec. 2013 )
=(Revenue - Cost of Goods Sold) / Revenue
=51 / 719.386
=7.08 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Arch Coal Inc had a gross margin of 7.08% for the quarter that ended in Dec. 2013 => No sustainable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Arch Coal Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross_Profit 2693355915258005057901,018613351

Arch Coal Inc Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Gross_Profit 24628318916616712611511010351
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