gross margin

Also found in: Dictionary, Thesaurus, Medical, Legal, Acronyms, Encyclopedia, Wikipedia.

Gross Profit Margin

A measure of how well a company controls its costs. It is calculated by dividing a company's profit by its revenues and expressing the result as a percentage. The higher the gross profit margin is, the better the company is thought to control costs. Investors use the gross profit margin to compare companies in the same industry and well as in different industries to determine what are the most profitable. It is also called the profit margin or simply the margin.

gross margin

Gross margin.

Gross margin is the percentage by which profits exceed production costs. To find gross margin you divide sales minus production costs by sales.

For example, if you want to calculate your gross margin on selling handmade scarves, you need to know how much you spent creating the scarves, and what you collected by selling them.

If you sold 10 scarves at $15 a piece, and spent $8 per scarf to make them, your gross margin would be 46.7%, or $150 in sales minus $80 in production costs divided by $150. Gross margin is not the same as gross profit, which is simply sales minus costs. In this example, it's $70, or $150 minus $80.

If you're doing research on a company you're considering as an investment, you can look at the gross margin to help you see how efficiently it uses its resources.

If the company has a higher gross margin than its competition, it can command higher prices or spend less on production. That might mean it can allocate more resources to developing new products or pursuing other projects.

gross margin

References in periodicals archive ?
2010-2015 Germany Rail Cost Price Production Value Gross Margin Analysis
While gross margin always goes down with the introduction of new product lines, the good news is that the only way is up:
This is the area where most businesses can make significant gains in their gross margin percentage.
Surprisingly, the other four key drivers of margin maximization are often not comprehensively included in margin improvement programs, yet they will usually improve gross margin as much as, if not more than, operational improvements.
Revenue and Gross Margin of Daphne International, 2007-2012
The advanced information services segment experienced gross margin growth of approximately $376,000, or 26 percent, and generated an additional $112,000 in operating income for the fourth quarter of 2007.
Gross margin for the Delaware and Maryland distribution operations increased $1.
C) Cost of sales and gross margin for proprietary products and distribution revenues are shown as a percentage of that specific source of revenue.
Gross margin at its Marlboro facility, including stock compensation expenses associated with the adoption of FAS123R, is expected to be in the 5% to 10% range in the second quarter, and then to increase to a range of 7% to 15% in the second half of fiscal 2006 as the Company benefits from its thin-wafer conversion.
Actual revenue for October and November of 1992 was approximately equal to revenue for the same period of 1991, but higher operating expenses and lower gross margins have resulted in reduced net earnings.
Creative Vistas reported gross margin of $2,272,066 or 35 percent an increase of $1,365,305 or 3 percent from gross margin of $ 906,761 or 32 percent from the same period a year ago.
Lower prices on Bernoulli products to meet competitive pressures, and lower gross margins on new Tape products are the principal reasons for the overall gross margin decline.