Gross Margin

Gross margin is the difference between revenue and cost of goods sold (COGS), divided by revenue, expressed as a percentage. Generally, it is calculated as the selling price of an item, less the cost of goods sold. For example, if a product sells for $100 and costs $70 to manufacture, its gross margin is 30%. Gross margin represents the portion of each dollar of revenue that the company retains as gross profit. High gross margins indicate that a company can produce its goods efficiently and retain a significant portion of its sales to cover operating expenses.