Gross Margin
Definition
Revenue minus the cost of goods sold (COGS), expressed as a percentage of revenue. Shows the profitability of core product/service before operating expenses.
Why is Gross Margin Important?
Gross Margin is a critical concept in corporate finance, business analysis, and investment decision-making. Whether you are evaluating a company's performance, assessing an investment opportunity, or running your own business, understanding this metric helps you make data-driven decisions that maximize returns and minimize risk.
Our business calculators provide instant computations for this metric, empowering entrepreneurs, analysts, and investors to evaluate financial health and make strategic decisions with confidence.
What is Gross Margin?
Gross margin is the percentage of revenue remaining after subtracting the cost of goods sold (COGS). It measures how efficiently a company produces and sells its products before operating expenses, interest, and taxes.
Formula
Gross Margin = ((Revenue โ COGS) / Revenue) ร 100
Industry Benchmarks
| Industry | Typical Gross Margin |
|---|---|
| Software / SaaS | 70โ85% |
| Pharmaceuticals | 65โ80% |
| Consumer goods | 40โ60% |
| Retail | 25โ45% |
| Restaurant | 55โ65% |
| Grocery | 25โ30% |
| Manufacturing | 25โ40% |
| Automotive | 15โ20% |