Profitability
Gross margin
Gross profit as a share of revenue. Multiply by a hundred for a percentage.
The Formula
GM = (R - C) / R
Gross profit as a share of revenue. Multiply by a hundred for a percentage.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| GM | Gross margin | ratio | Gross profit as a share of revenue. |
| R | Revenue | currency | Total sales for the period. |
| C | Cost of goods sold | currency | Direct cost of what was sold. |
What Each Symbol Means
GMratio
Gross margin
Gross profit as a share of revenue.
Rcurrency
Revenue
Total sales for the period.
Ccurrency
Cost of goods sold
Direct cost of what was sold.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate gross margin page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Gross Margin, filed under Business. Every number the guide produces comes from substituting into this one line.