Technical definition
Gross profit divided by revenue, showing the share of sales left after direct product cost.
How it works
Gross profit equals revenue minus cost of goods sold. The percentage helps compare pricing and product cost across periods, but classification policies and business mix must be consistent.
Everyday example
Revenue 120,000 less cost of goods sold 72,000 gives gross profit 48,000 and gross margin 40%.
Common pitfall
Gross margin excludes operating expenses and therefore is not the final profit margin.