04/01/2026
Gross Margin
Gross Margin is a basic business metric that shows how much money a company keeps after paying the direct costs of producing its goods or services.
Formula
\text{Gross Margin} = \frac{\text{Revenue} - \text{Cost of Goods Sold (COGS)}}{\text{Revenue}} \times 100\%
What it tells you
How efficiently a company produces or delivers what it sells
Higher gross margin = more money left to cover operating expenses, taxes, and profit
Simple example
Revenue: $1,000
COGS: $600
\text{Gross Margin} = \frac{1{,}000 - 600}{1{,}000} \times 100\% = 40\%
So, the company keeps 40% of its sales after production costs.
If you want, I can explain:
The difference between gross margin vs. gross profit
Whatโs considered a good gross margin by industry
How to calculate it from an income statement
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