Gross Margin Calculator

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Gross Margin Calculator

Gross Margin is calculated by dividing Gross Profit by Total Revenue. The final answer is expressed as a percentage.

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What is Gross Margin?

Gross Margin is a simple but powerful financial ratio. Gross Margin (GM) is the company's Gross Profit divided by Total Revenue. Gross Profit (GP) is Total Revenue less Cost of Goods Sold (COGS).

You can thus get Gross Margin in two different ways:

  • Gross Margin = (Revenue - COGS) / Revenue
  • Gross Margin = Gross Profit / Revenue

Gross Margin is expressed as a percentage and Gross Margin + COGS always equals 100% by definition. For example, if your company has a 22% Cost of Goods Sold, then you also have a 78% Gross Margin.

Gross margin calculator

Terms related to Gross Margin

There are also a list of terms related to Gross Margin that you should be aware of.

First, Gross Margin (GM) is a financial ratio that relates to the Income Statement. An Income Statement, also called a Profit and Loss Statement, summarizes revenue and expenses for a given period.

Income Statement are normally recorded every month, and then rolled into quarterly and annual reports.

Here is a sample Income Statement:

  • Total Revenue
  • – Cost of Goods Sold
  • = Gross Profit
  • – Operating Expenses
  • = Operating Income
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