GlossaryAccountingAdvisory
Gross Margin
Definition
Revenue minus the direct cost of what was sold, expressed as a percentage of revenue.
In plain language
Gross margin shows how much of each rupee of sales is left after paying for the goods or services sold, before overheads such as rent, salaries outside production, and marketing.
A falling gross margin usually points to pricing or direct costs, whereas a healthy gross margin with a weak bottom line points to overheads.
Example
Sales of ₹10 lakh with a direct cost of ₹6 lakh leave a gross profit of ₹4 lakh: a gross margin of 40%.