Gross Margin
Categories: Accounting, Metrics
The gross margin for a business can be calculated using this handy equation:
(Revenue – Cost of Goods Sold) ÷ Revenue
Why would you want to figure out the gross margin—and is it really that gross?
The "ew" factor probably depends on how much you like math. As for why we need to figure out the gross margin, it's a handy tool for trying to decide how much of your revenues are tied up in the costs of making the product or service you're selling. If the margin is really high, it means that the costs of making the stuff you're selling are cutting into your revenues.