Financial StatementsBeginner

Gross Margin

The share of revenue left after paying the direct cost of goods sold.

Detailed explanation

It shows pricing power and production efficiency before overheads.

Formula

Gross margin = (Revenue − COGS) ÷ Revenue × 100

Example

Revenue ₹200 cr, COGS ₹120 cr → gross margin 40%.

Why it matters

High, stable gross margins often point to a strong brand or cost advantage.

Key points

  • Compare within the same industry.
  • Watch the trend over several years.
  • Different from operating and net margin.

Related terms

Cost of Goods SoldOperating Margin

More in Financial Statements

Income StatementRevenueCost of Goods SoldEBITDAEBITOperating Margin

Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.