Profitability
Gross margin
The share of each sale left after paying the direct cost of making the product or delivering the service.
Formula
Gross margin = Gross profit ÷ Revenue
Worked example
- Gross profit = $4.0bn
- Revenue = $10.0bn
- $4.0bn ÷ $10.0bn
Result: 40.0%
How to read it
High gross margins (software often 70%+) give a company room to spend on growth. Retailers and manufacturers are usually much lower.
Worked example uses made-up figures for 'Example plc'
See it with real numbers: Any company page → (free account)