What is Gross Margin?




Gross margin is the percentage of net sales that a company retains after paying all its direct expenses related to the sale of its products and/or provision of its services.

How to calculate gross margin

The gross margin formula is revenue minus cost of goods sold. A company's gross margin tells you how it fared on the sale of its products and/or provision of its services.

In other words, it's the amount of money a company retains after incurring the direct costs associated with producing the goods it sells and the services it provides.

The gross margin (also referred to as gross profit) represents each dollar of revenue that the company retains after subtracting COGS. However, gross margin may also be referred to as gross profit margin.

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