Gross Profit Margin
Browse all terms in GlossaryDefinition
Gross profit margin is the difference between sales and the cost of goods sold divided by revenue. It expresses the relationship between gross profit (sales - cost of goods sold) and sales revenue. More specifically, gross profit margin represents the percentage of each dollar of a company's revenue that is available to cover fixed costs after paying for the goods or services that were sold.
If a company produces widgets and earns $32 million in sales but pays $24 million for the items sold, then the company's gross profit margin would be ($32m - $24m)/$32m = %25.
Formula
Gross Profit Margin = Gross Profit / Revenues
Related Terms
Cost of Goods Sold, Gross, Gross Profit, Operating Margin, Profit Margin
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