Bookkeeping & Reporting

Gross Margin

Gross margin is the percentage of revenue left after direct costs of sales are subtracted.

Quick answer

Gross margin is the percentage of revenue left after direct costs of sales are subtracted.

It matters because it shows how much room is left to cover operating expenses and profit.

A product business with $100,000 in revenue and $60,000 in direct costs has a 40 percent gross margin.

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Plain-English Definition

What Gross Margin means

Gross margin is the percentage of revenue left after direct costs of sales are subtracted.

Why it matters It matters because it shows how much room is left to cover operating expenses and profit.
Simple example A product business with $100,000 in revenue and $60,000 in direct costs has a 40 percent gross margin.
Related Questions

Questions people ask about Gross Margin

What does Gross Margin mean?

Gross margin is the percentage of revenue left after direct costs of sales are subtracted.

Why does Gross Margin matter?

It matters because it shows how much room is left to cover operating expenses and profit.

What is a simple example of Gross Margin?

A product business with $100,000 in revenue and $60,000 in direct costs has a 40 percent gross margin.

When should I ask a CPA about Gross Margin?

Ask a CPA when the term changes how your books are kept, how reports are read, or how tax numbers are produced from accounting records.

How is Gross Margin different from Net Margin?

Gross Margin means Gross margin is the percentage of revenue left after direct costs of sales are subtracted. Net Margin means Net margin is the percentage of revenue that remains as profit after all expenses are considered. The difference is that they apply to different tax, accounting, or business situations and should not be treated as interchangeable.

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