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Education Management Corp (OTCPK:EDMC)
Gross Profit
$196 Mil (TTM As of Jun. 2014)

Education Management Corp's gross profit for the three months ended in Jun. 2014 was $-870 Mil. Education Management Corp's gross profit for the trailing twelve months (TTM) ended in Jun. 2014 was $196 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Education Management Corp's gross profit for the three months ended in Jun. 2014 was $-870 Mil. Education Management Corp's revenue for the three months ended in Jun. 2014 was $503 Mil. Therefore, Education Management Corp's Gross Margin for the quarter that ended in Jun. 2014 was -172.84%.

Education Management Corp had a gross margin of -172.84% for the quarter that ended in Jun. 2014 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Education Management Corp was 49.49%. The lowest was 33.55%. And the median was 38.20%.

Warning Sign:

Education Management Corp gross margin has been in long term decline. The average rate of decline per year is -4%.


Definition

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

Education Management Corp's Gross Profit for the fiscal year that ended in Jun. 2014 is calculated as

Gross Profit (A: Jun. 2014 )=Revenue - Cost of Goods Sold
=2272.736 - 1373.699
=899

Education Management Corp's Gross Profit for the quarter that ended in Jun. 2014 is calculated as

Gross Profit (Q: Jun. 2014 )=Revenue - Cost of Goods Sold
=503.481 - 1373.699
=-870

Education Management Corp Gross Profit for the trailing twelve months (TTM) ended in Jun. 2014 was 222.692 (Sep. 2013 ) + 248.086 (Dec. 2013 ) + 595.202 (Mar. 2014 ) + -870.218 (Jun. 2014 ) = $196 Mil.

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

Education Management Corp's Gross Margin for the quarter that ended in Jun. 2014 is calculated as

Gross Margin (Q: Jun. 2014 )=Gross Profit (Q: Jun. 2014 ) / Revenue (Q: Jun. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=-870 / 503.481
=-172.84 %

* 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

Education Management Corp had a gross margin of -172.84% for the quarter that ended in Jun. 2014 => 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.

Education Management Corp Annual Data

Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14
Gross_Profit 3794566347839441,2411,4141,2591,052899

Education Management Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Gross_Profit 320269228295639-852223248595-870
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