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
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