2 min read
Definition
Gross margin is gross profit (revenue minus the direct cost of goods or services sold) divided by revenue, as a percentage. It measures profitability at the trading level, before overheads, interest and tax.
In plain terms
It's how much you make on the core activity before running costs. A healthy gross margin gives you room to cover overheads and still profit; a thin one leaves no slack.
Why it matters for your company
Gross margin drives everything downstream — protect it, and understand what erodes it. See how to read a profit and loss.
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