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Gross Margin
Sales revenue minus the cost of goods sold.
Implications
A financial metric that represents the difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue, often used to assess a company's profitability and pricing strategy.
Example
Example: A retailer calculates its gross margin to be 40%, meaning that 40% of its revenue remains after covering the cost of the products it sells, which is used to cover other operating expenses and generate profit.
Related Terms
Different from net margin, which includes all expenses, gross margin focuses specifically on the profitability of core business activities before accounting for operating costs, taxes, and interest.
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