Gross profit margin is a business metric used to measure the profitability of a company by determining how much of each dollar of revenue is actual profit. This calculation takes into account both direct and overhead costs associated with producing goods or services. The higher the gross profit margin, the more efficient the business is in utilizing its resources to generate profits. By watching this key performance indicator over time, businesses can make sure that their prices are appropriate for the level of expenses they incur, and adjust them accordingly.