Gross profit margin, also known as gross margin, is a financial metric that shows how much revenue a business retains after accounting for the cost of goods sold (COGS), which includes direct production costs such as wages and materials.
It reflects how efficiently a company delivers its products or services and is a key measure of profitability.
The formula is: (Total Revenue – Cost of Goods Sold) ÷ Total Revenue × 100.
This percentage indicates how much of each dollar earned remains after covering production expenses. A higher gross profit margin suggests stronger cost control and financial health, while a lower margin may point to increased production costs or pricing challenges.