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Level 3 Communications Inc (NYSE:LVLT)
Gross Profit
$4,622 Mil (TTM As of Sep. 2014)

Level 3 Communications Inc's gross profit for the three months ended in Sep. 2014 was $715 Mil. Level 3 Communications Inc's gross profit for the trailing twelve months (TTM) ended in Sep. 2014 was $4,622 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Level 3 Communications Inc's gross profit for the three months ended in Sep. 2014 was $715 Mil. Level 3 Communications Inc's revenue for the three months ended in Sep. 2014 was $1,629 Mil. Therefore, Level 3 Communications Inc's Gross Margin for the quarter that ended in Sep. 2014 was 43.89%.

Level 3 Communications Inc had a gross margin of 43.89% for the quarter that ended in Sep. 2014 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Level 3 Communications Inc was 60.86%. The lowest was 11.40%. And the median was 45.59%.


Definition

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

Level 3 Communications 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
=6313 - 2471
=3,842

Level 3 Communications Inc's Gross Profit for the quarter that ended in Sep. 2014 is calculated as

Gross Profit (Q: Sep. 2014 )=Revenue - Cost of Goods Sold
=1629 - 914
=715

Level 3 Communications Inc Gross Profit for the trailing twelve months (TTM) ended in Sep. 2014 was 1900 (Dec. 2013 ) + 995 (Mar. 2014 ) + 1012 (Jun. 2014 ) + 715 (Sep. 2014 ) = $4,622 Mil.

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

Level 3 Communications Inc's Gross Margin for the quarter that ended in Sep. 2014 is calculated as

Gross Margin (Q: Sep. 2014 )=Gross Profit (Q: Sep. 2014 ) / Revenue (Q: Sep. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=715 / 1629
=43.89 %

* 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

Level 3 Communications Inc had a gross margin of 43.89% for the quarter that ended in Sep. 2014 => Durable 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.

Level 3 Communications Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross_Profit 1,4511,3801,8612,4362,4922,1972,1572,6273,7743,842

Level 3 Communications Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
Gross_Profit 9389489599489496471,9009951,012715
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