What is gross margin?
What is gross margin?
Gross margin is the company’s net sales revenue minus its COGS. Simply put, it's the amount of money a company keeps from sales after taking into account the direct costs associated with producing its product. For example, if a company pays $1 to produce a product, and sells that product for $3, that product’s Gross Margin is the $2 profit that the company derives from the sale. A higher gross margin will allow the company to keep more of its revenue, in turn, allowing the company to spend money elsewhere like debt obligations or other investments. (Gross Margin = Net Sales - COGS)
For more information on this topic, check out this article from our friends at Investopedia.