Gross Margin Definition

The gross margin is the ratio of a company’s gross profit to its revenue. The gross profit is the difference between a company’s revenue and the cost of goods sold. The gross margin is a measure of a company’s financial health and profitability.

A company with a high gross margin is more profitable than a company with a low gross margin. A company with a high gross margin can afford to spend more on operating expenses and still make a profit. A company with a low gross margin may not be able to afford to spend as much on operating expenses and still make a profit.

Thegross margin is important for investors to consider when evaluating a company. A company with a high gross margin is more likely to be profitable and have cash flow problems than a company with a low gross margin.