Gross Margin

Gross Margin is a profitability ratio indicating the percentage of revenue retained after subtracting the cost of goods sold (COGS). It reflects how efficiently a company produces or delivers its products or services relative to sales.

Gross Margin Formula: Gross Margin (%) = [(Revenue – COGS) / Revenue] × 100

A higher gross margin suggests better pricing power or operational efficiency, while a lower margin indicates cost pressures or competitive pricing. SaaS businesses often report high gross margins (70%–90%), while retail and manufacturing companies typically operate on thinner margins.