Gross Margin

• Metric
• Financial
• Business Performance

The difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue.

Problem it addresses

Understanding the profitability of selling products or services is crucial for businesses. Without analyzing gross margin, companies may not realize their product pricing or cost structure is unsustainable, potentially leading to financial issues.

How it helps

Gross margin indicates how efficiently a company uses its resources to produce and sell products at a profit. It helps businesses assess the health of their core operations, make informed decisions about pricing, cost management, and product development, and strategize for improving profitability. Tracking gross margin over time can also reveal trends that necessitate adjustments in business strategy.