Plain-English definitions, reviewed by an independent investor
Gross Margin
Gross margin is the share of revenue left after the direct cost of making the product.
Gross margin is the share of revenue left after the direct cost of making the product.
Gross Margin = (Revenue − COGS) ÷ Revenue × 100%
Why it matters
It reveals pricing power and production efficiency before overhead.
Common confusion
A falling gross margin often signals rising costs or pricing pressure.
Frequently Asked Questions
Gross vs operating margin?
Gross ignores overhead; operating includes it.
High gross margin good?
Usually yes; software sits high, manufacturing sits low.