GROSS MARGIN Meaning and
Definition
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Gross margin refers to a financial metric that quantifies the profitability of a company's core operations by measuring the difference between its total revenue and the cost of goods sold (COGS). It is calculated by deducting COGS from the total revenue and represents the amount of money a company generates from its products or services after accounting for the direct expenses associated with their production or delivery.
This metric is widely used to assess a company's ability to generate profit from its primary business activities. It provides insights into the efficiency of a company's cost structure, as a higher gross margin indicates that a company is able to sell its products or services at a higher price than the direct costs required to produce or deliver them.
Gross margin is usually expressed as a percentage or ratio, known as the gross margin percentage. This percentage represents the proportion of each revenue dollar that remains as gross profit after accounting for COGS. Higher gross margin percentages indicate a more favorable financial position for a company, as it signifies that a larger portion of revenue remains available to cover other operating expenses and contribute to net profit.
Investors, analysts, and managers frequently use gross margin as a key performance indicator to compare a company's profitability with its competitors, track trends over time, and assess the effectiveness of cost management strategies. It serves as an important benchmark for evaluating a company's overall financial health and operational efficiency within its industry.
Common Misspellings for GROSS MARGIN
- fross margin
- vross margin
- bross margin
- hross margin
- yross margin
- tross margin
- geoss margin
- gdoss margin
- gfoss margin
- gtoss margin
- g5oss margin
- g4oss margin
- griss margin
- grkss margin
- grlss margin
- grpss margin
- gr0ss margin
- gr9ss margin
- groas margin
Etymology of GROSS MARGIN
The word "gross" originated from the Old French word "gros" meaning "thick" or "big". It later evolved to refer to the entire amount before deductions or expenses.
The word "margin" came from the Latin word "margo" meaning "edge" or "border". In the context of accounting and finance, "margin" refers to the difference or gap between two values.
Combining these terms, the phrase "gross margin" emerged in the mid-19th century to convey the concept of the difference between total revenue and the cost of goods sold. It represents the proportion of revenue that a company retains after deducting the cost of producing or acquiring the goods or services it sells.
Similar spelling word for GROSS MARGIN
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