📈 Metrics

Gross margin

How much of each sale you keep after the direct cost of making it.

Formula

Gross margin % = (Revenue − COGS) ÷ Revenue

Gross margin shows how profitable the product itself is, before overheads like rent and salaries.

Software has high gross margins (70–90%). Groceries and airlines are much lower. Comparing margins tells you what kind of business you're looking at.

🧮 Example

A T-shirt sells for ₹800 and costs ₹320 to make and ship. Gross margin = (800 − 320) ÷ 800 = 60%.

🎯 Interview tip

If a company's gross margin falls, look at input costs or discounting before anything else.

Used in

Learn next

COGS (cost of goods sold)

The direct cost of making what you sold.

Contribution margin

What each extra unit adds towards covering fixed costs.

Profit

What's left after you pay for everything.

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