Gross Profit Margin

Filed Under »
Dictionary Says

Definition of 'Gross Profit Margin'

A financial metric used to assess a firm's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings.

Also known as "gross margin".

Calculated as:

Gross Profit Margin


Where:
COGS = Cost of Goods Sold
Investopedia Says

Investopedia explains 'Gross Profit Margin'

For example, suppose that ABC Corp. earned $20 million in revenue from producing widgets and incurred $10 million in COGS-related expense. ABC's gross profit margin would be 50\%. This means that for every dollar that ABC earns on widgets, it really has only $0.50 at the end of the day.

This metric can be used to compare a company with its competitors. More efficient companies will usually see higher profit margins. 

Video Definition

Search results for

'Gross Profit Margin'

  • Profitability Indicator Ratios: Profit Margin Analysis ...

    http://www.investopedia.com/university/ratios/profitability-indicator/ratio1.asp
    ... margin ratios individually: Gross Profit Margin - A company's cost of sales, or
    cost of goods sold, represents the expense related to labor, raw materials and ...

  • A Look At Corporate Profit Margins

    http://www.investopedia.com/articles/fundamental/04/042804.asp
    ... 1. Gross Profit Margin The gross profit margin tells us the profit a company
    makes on its cost of sales, or cost of goods sold. ...

  • Understanding Profit Margin

    http://www.investopedia.com/video/play/introduction-to-profit-margins
    Videos /. Understanding Profit Margin. Next video: Fat Cat CEOs. Learn a primary
    method investors use to analyze a company's profitability. ...

  • Value Investing: Finding Value In Income Statements | Investopedia

    http://www.investopedia.com/university/value-investing/value-investing5.asp
    ... Calculated as a percentage, net profit margin divides net profit by sales,
    while gross profit margin divides gross profit by sales. ...

  • Fundamental Analysis: The Income Statement | Investopedia

    http://www.investopedia.com/university/fundamentalanalysis/fundanalysis6.asp
    ... do profit-margin comparisons between companies that do not issue a separate disclosure
    of their cost of goods sold figures (which are needed to do gross margin ...

  • Run Your Finances Like A Business

    http://www.investopedia.com/articles/pf/07/corporatefinance.asp
    ... Profit Margin In the corporate world, there are two types of profit margins:
    gross and net. Gross profit is your profit before taxes. ...

  • Monsanto Growing Slower This Spring

    http://stocks.investopedia.com/stock-analysis/2010/Monsanto-Growing-Slower-This-Spring-MON-DE-ADM-BG0409.aspx
    ... as well. Gross margins were 54% versus 62%, while net profit margin dropped
    to 23% from 27% in the 2009 second quarter. The company ...

  • Analyzing Operating Margins

    http://www.investopedia.com/articles/stocks/08/operating-margins.asp
    ... maintain a stock market listing. Gross profit divided by revenue is a percentage
    value known as gross margin. Analyzing gross margin is ...

  • Analyze Investments Quickly With Ratios

    http://www.investopedia.com/articles/stocks/06/ratios.asp
    ... A really high profit margin relative to an industry could mean that the company
    has ... Other profitability ratios include operating margin and gross margin. ...

  • CFA Level 1 Study Guide - Financial Ratios - Operating ...

    http://www.investopedia.com/exam-guide/cfa-level-1/financial-ratios/operating-profitability-ratios.asp
    ... 3.21 Conclusion. 4. Macroeconomics: 4.1 Introduction; 4.2 Gross Domestic Product
    (GDP); ... Characteristics; 12.6 Short Selling; 12.7 Buying on Margin and Maintenance ...

Related Articles

Partner Links