The percentage of revenue that exceeds the cost of goods sold, showing how much of each rupee in sales is retained as gross profit.
Gross margin is expressed as a percentage and indicates the profitability of core business operations before operating expenses. A higher gross margin means more money is available to cover operating expenses and generate net profit. Gross margin trends over time reveal whether a business is becoming more or less efficient in production/procurement. It's different from markup — margin is calculated on selling price while markup is calculated on cost.
A product sells for ₹2,000 and costs ₹1,200 to produce. Gross Margin = ((₹2,000 − ₹1,200) ÷ ₹2,000) × 100 = 40%.
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Software/SaaS: 70–90%. Consulting: 50–70%. Manufacturing: 25–35%. Retail: 25–50%. Food/Grocery: 20–35%. Compare within your industry for meaningful benchmarks.
Gross margin only deducts COGS from revenue. Net margin deducts ALL expenses (COGS + operating expenses + taxes + interest). Gross margin is always higher than net margin.
The amount or percentage added to the cost price of a product to determine its selling price, covering overhead expenses and generating profit.
The profit a company makes after deducting the cost of goods sold (COGS) from its revenue, before accounting for operating expenses.
The total profit of a business after deducting all expenses, taxes, and costs from total revenue. Also called the bottom line or net income.
The direct costs attributable to the production or purchase of goods sold by a company during a specific period.
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