Gross Margin

Extracted Attributes

• Formula

  (Revenue - Cost of Goods Sold) / Revenue

• Purpose

  To determine the value of incremental sales and guide pricing and promotion decisions

• Metric Type

  Profitability Ratio

• Alternative Name

  Gross Profit Margin

• Primary Components

  Net Sales (Revenue) and Cost of Goods Sold (COGS)

• Unit of Measurement

  Percentage (%)

• Income Statement Position

  Top-line profitability (before operating expenses)

Timeline

• The All-In Podcast (Episode 163) features a deep dive into the 'Fintech Reckoning,' using gross margin as a key metric to analyze the financial health and cash burn of tech-enabled startups. (Source: Document ebe1f88d-428a-4f23-a40c-fcfb4a705668)

  2024-01-26

Gross margin

Gross margin, or gross profit margin, is the difference between revenue and cost of goods sold (COGS), divided by revenue. Gross margin is expressed as a percentage. Generally, it is calculated as the selling price of an item, less the cost of goods sold (e.g., production or acquisition costs, not including indirect fixed costs like office expenses, rent, or administrative costs), then divided by the same selling price. "Gross margin" is often used interchangeably with "gross profit", however, the terms are different: "gross profit" is technically an absolute monetary amount, and "gross margin" is technically a percentage or ratio. Gross margin is a kind of profit margin, specifically a form of profit divided by net revenue, e.g., gross (profit) margin, operating (profit) margin, net (profit) margin, etc.

Web Search Results

• Gross margin

  Gross margin, or gross profit margin, is the difference between revenue and cost of goods sold (COGS), divided by revenue. Gross margin is expressed as a percentage. Generally, it is calculated as the selling price of an item, less the cost of goods sold (e.g., production or acquisition costs, not including indirect fixed costs like office expenses, rent, or administrative costs), then divided by the same selling price. "Gross margin" is often used interchangeably with "gross profit", however, [...] Gross margin is a kind of profit margin, specifically a form of profit divided by net revenue, e.g., gross (profit) margin, operating (profit) margin, net (profit) margin, etc. ## Purpose [edit] The purpose of calculating margins is "to determine the value of incremental sales, and to guide pricing and promotion decision." ### Percentage margins and unit margins [edit] [...] ### Definition of "Unit" [edit] "Every business has its own notion of a 'unit,' ranging from a ton of margarine, to 64 ounces of cola, to a bucket of plaster. Many industries work with multiple units and calculate margin accordingly... Marketers must be prepared to shift between varying perspectives with little effort because decisions can be rounded in any of these perspectives." Investopedia defines "gross margin" as: Gross margin (%) = (Revenue − Cost of goods sold) / Revenue

• Gross Margin | Formula + Calculator - Wall Street Prep

  The gross margin is a measure of profitability that compares a company’s gross profit to its revenue in the corresponding period. The formula to calculate gross margin divides a company’s gross profit in a given period by its revenue. The gross profit margin is the ratio between gross profit and revenue, expressed as a percentage. The gross margin reflects the percentage of each dollar of revenue that a company retains as gross profit. [...] The Gross Margin is a profitability ratio that measures the percentage of revenue remaining after deducting the cost of goods sold (COGS) incurred in the period. Since only direct costs are accounted for in the metric, the gross profit margin ratio reflects the income available for meeting fixed costs and other non-operating expenses. Generating [...] ## How to Calculate Gross Margin The gross margin is the revenue remaining upon subtracting cost of goods sold (COGS), expressed as a percentage. Calculating a company’s gross margin involves dividing its gross profit by the revenue in the matching period. The two metrics necessary to calculate the gross margin—the gross profit and net revenue—are each recognized on the GAAP-based income statement.

• Gross Margin: Definition, Example, Formula, and How to Calculate

  Gross margin is the percentage of a company's revenue that's retained after direct expenses such as labor and materials have been subtracted. It's an important profitability measure that looks at a company's gross profit as compared to its revenue. Gross profit is determined by subtracting the cost of goods sold from revenue. The higher the gross margin, the more revenue a company retains. It can then use the revenue to pay other costs or satisfy debt obligations. [...] ## Formula and Calculation of Gross Margin ​Gross Margin=(Net SalesNet sales-COGS​)×100​ Net Sales is the equivalent of revenue or the total amount of money generated from sales for the period. It can also be referred to as net sales because it can include discounts and deductions from returned merchandise. Revenue is typically called the top line because it appears at the top of the income statement. Costs are subtracted from revenue to calculate net income or the bottom line. [...] Gross margin is the percentage of money a company keeps from its sales after covering the direct costs of producing its goods or services. It shows how efficiently a business turns revenue into profit before accounting for overhead and other expenses. ## What Is Gross Margin? ### Key Takeaways

• What is gross margin?

  Gross margin is the percentage of revenue left over after you subtract your company’s direct costs (i.e., the cost of producing or selling your goods or services). In a manufacturing company, these direct costs are called cost of goods sold (COGS); in retail and wholesale businesses, they’re known as cost of sales. [...] Home > Articles and tools > Entrepreneur's toolkit > Templates for download > Glossary > Gross margin Back to glossary Definition # Gross margin The portion of a company’s revenue left over after direct costs are subtracted. Gross margin is one of the most important indicators of a company’s financial performance. It’s the portion of business revenue left over after you subtract direct costs, such as labour and raw materials.

• Gross Margin: Definition, Example, Formula, and How to Calculate

  Gross Margin is a critical metric that measures the profitability of a business by considering its revenue and cost of goods sold (COGS.) By understanding the definition, example, formula, and gross margin calculation, you can compare your company's financial performance to industry benchmarks. [...] # Gross Margin Gross margin, a key financial performance indicator, is the profit percentage after deducting the cost of goods sold (COGS) from a company's total revenue. ## Track all your FinancialKPIs in one place Sign up for free and start making decisions for your business with confidence. Sign up with Google or Sign up with your emailFree for 14 days ● No credit card required [...] This gross profit metric gives businesses valuable insights into their operational efficiency and profitability by revealing how much money is left to cover overhead expenses such as marketing costs, rent, and employee salaries. Gross margin is commonly presented as a percentage, allowing for easy comparison of a company's performance against its industry peers or historical data.