Gross Margin

Ratio of gross profit to sales revenue. (Also sometimes used as a synonym for gross profit).

For a manufacturer, gross margin is a measure of a company's efficiency in turning raw materials into income; for a retailer it measures their markup over wholesale.

Most companies would like a gross margin that's as large as possible. An exception is the discount retailer; part of their game is to make their operations and financing so efficient that they can afford to keep their markup tiny.

See the sample income statement.

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