Gross margin
Also called: gross profit margin
Gross profit as a percentage of revenue. It reflects how much a company earns over the direct cost of what it sells.
Gross margin = (revenue − cost of goods sold) ÷ revenue × 100. It is shaped by pricing power, input costs and the mix of products sold, and varies widely between industries.
Example
Revenue of ₹1,200 crore and materials costing ₹660 crore give gross profit of ₹540 crore, a gross margin of 45%.
Learn more in these lessons
- Profit margins and what they revealWhat do profit margins tell you about a company?
- Industry analysis and competitive positioningHow does an industry's structure affect the profits its companies can earn?
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