What is Gross margin?
Gross margin: Share of revenue left after direct production costs.
Where Gross margin fits
Gross margin is part of Profit & Margins in Accounting. Profit has layers: revenue minus COGS is gross profit, minus operating costs is operating profit, and after interest and tax is net income. Margins show each as a percent of revenue.
Practical tip
Watch margins, not just totals; growth with shrinking margins is a warning.
Related terms
- Revenue
- Total money a company earns from sales before costs.
- Net income
- What remains after all expenses and taxes.
- EBITDA
- Profit before interest, taxes, depreciation and amortization.
- Operating profit
- Profit from core operations before interest and taxes.
Formulas you will use with it
Test yourself
Which term means: “Share of revenue left after direct production costs.”?
Revenue · Gross margin · Operating profit
Answer: Gross margin
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