Gross Margin
Category: Strategic
The percentage of revenue remaining after subtracting the cost of goods sold (COGS).
What it Measures ?
How much we keep after making the product.
Relevant StakeHolders
Finance Team, Product Managers, Sales Heads
Why it Matters ?
Shows profit after production costs, helping assess pricing and cost efficiency.
In-depth Use Case / Real-world Example
A company that manufactures LED lights sells a product for ₹100 and its COGS is ₹60. The gross margin is (100−60)/100 × 100 = 40%. Gross margin reflects how efficiently a company produces and sells its products. Higher margins mean better profitability, which helps cover fixed costs like salaries, marketing, and R&D.
Sample Formula
(Revenue - COGS) / Revenue