The term gross margin refers to a profitability measure that looks at a company's gross profit compared to its revenue or sales. A company's gross margin is expressed as a percentage. Gross profit is determined by calculating gross sales. The higher the gross margin, the more capital a company retains, which it can then use to pay other costs or satisfy debt obligations.
Formula for Gross Margin
Calculate Gross Profit = Revenue - COGS
Divide Gross Profit by Total Revenue and multiply with 100 (expressed as %) - Gross Margin = Gross Profit / Total Revenue * 100
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