Gross margin
Gross profit after direct cost of sales divided by revenue.
Plain languagePractical exampleConnected reading
01
What is it?
Gross profit after direct cost of sales divided by revenue.
02
Why does it matter?
It helps reveal pricing power, product mix and changes in input costs.
03
How should it be read?
Review promotions, currency effects and accounting classifications.
04
Common mistake
Comparing gross margins across unlike business models without context.
A simple example
Revenue of 100 less cost of sales of 65 gives a 35% gross margin.