Sales Terms

Gross Margin

Gross Margin is the difference between a company's revenue and its cost of goods sold.

What's Inside

    Definition

    Gross Margin is the difference between a company's revenue and its cost of goods sold.

    Gross margin is one of the most important lever to an investor or business owner, as it helps determine how much profit a company can generate from sales.

    Example

    If a pen costs $2 to buy raw materials & to be made into a final product and the selling price is $5, $3 is the gross margin. (Selling price (minus) Cost of production)

    Because the input costs are lower in software businesses, Gross margins tend to be higher