Gross Margin
Gross Profit Margin
Profitability RatiosGross profit as a percentage of revenue: what remains after direct production costs, before operating expenses.
Formula
Gross Margin = (Revenue - COGS) / Revenue
Why it matters
It is the purest read on pricing power and input-cost pressure. Falling gross margins usually reach the bottom line eventually, whatever management says about cost control below the line.
Indian example
Related terms
Learn the concept
Profitability Ratios →From the research
How The Valuation Node Approaches Research
The research method behind The Valuation Node, how assumptions are stated, how sources are chosen, and how uncertainty is disclosed in every published analysis.
ValuationWhat Three Years of a Cash Flow Statement Reveals That One Year Hides
A single year of cash flow is a snapshot. Three years is a story. Learn what the trend reveals about earnings quality, funding, and sustainability.
ValuationComparing Two Companies on ROE, and Why the Higher One Is Not Always Better
Two companies can report the same ROE for very different reasons. DuPont analysis shows why an ROE built on leverage is not the same as one built on quality.