Why You Need To Understand Bank Exchange Rates

In an increasingly global market place, particularly in Australia where the bulk of goods we consume come from overseas imports it has become important to understand Bank Exchange Rates and how they are calculated.

The strong Aussie dollar - near record highs - has seen the majority of Australians now buying their goods from overseas usually over the internet. The reason for this is usually two fold and comes down to ease and more competitive prices. Personally, I have traveled the world and have seen the prices paid for basic and non basic items and became somewhat disillusioned with the poor service and prices we receive in outlets across Australia. Without harping on too much, it is important to understand how the bank's come up with this rate and what you can do to achieve the best possible rate.

Gross Margin

If we want to find gross income, we have to minus cost of sales from net revenues. This will show how efficient the company is able to manufacture one unit of product depending on its value in the market. This difference includes only variable cost of the product and shows how big the markup is put on the products cost price. This gross margin is distributed to other segments of the business - administration and other costs that are fixed and other purposes - like research and development, new inventory or equipment.

If the company is commercial, the gross margin is depending on the type of sector, but it mostly depends on the type of product. Usually the gross margin for such companies is lower than for manufacturing companies, because it is thought that it is cheaper to produce the product rather than to buy it from someone else and resell it. Here will be two examples to explain this.