Financial Analysis
Gross Margin
Revenue minus cost of goods sold, expressed as a percentage of revenue. Measures the margin remaining after direct product or service costs, before operating expenses.
Revenue minus cost of goods sold (COGS), divided by revenue, expressed as a percentage. Reflects the portion of each revenue dollar retained after direct production or service delivery costs are subtracted. COGS typically includes materials, direct labor, and other costs directly attributable to producing the product or service. Operating expenses such as rent, marketing, and owner compensation are excluded from this calculation. Gross margin varies significantly by industry and is used as a baseline profitability metric in financial analysis and business valuation. (Also see SDE, EBITDA, Four-Wall EBITDA.)