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Accounting

Gross Margin

The percentage of revenue left after the cost of goods sold.

Gross margin shows how much of each sale remains after direct product costs, before operating expenses. It is a core measure of pricing and sourcing health.

Because it depends on COGS, errors in landed cost or inventory valuation flow straight through to a misleading margin.

Formula

Gross margin = (Revenue − COGS) ÷ Revenue

Expressed as a percentage of revenue.