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Can the gross profit margin in an income statement exceed 100 percent?

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I am reviewing financial projects from a technology start up. They show the gross profit margin as high as 118%. In some years it is less than 100%. Is there any circumstance that gross profit margin would exceed 100%?

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There are really no circumstances that I can think of where gross margin should exceed 100% if an organization is properly recording transactions according to GAAP. Theoretically, an organization might book contra-expenses against cost of revenues accounts that exceed the total cost of revenues resulting in negative cost of revenues and a gross margin in excess of 100% during a certain period. However, it is almost certain that such an organization is improperly accounting for these contra-expenses as they should more likely be an offset to a prepaid expense and have a net zero effect on the income statement or be reflected as income if they are not directly tied to expenses incurred.

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You are probably mistaking an Return on Investment (ROI) calculation with a Gross Profit Margin calculation. To calculate gross profit margin do the following:

  1. Subtract Cost of Goods Sold (COGS) from Total Revenue
  2. Divide the result by Total Revenue.

Based on that approach, gross profit margin cannot be greater than 100%.