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Finance Dictionary and Glossary of Investment Terms
gross margin
Definition 1.
Gross income divided by net sales, expressed as a percentage. Gross margins reveal how much a company earns taking into consideration the costs that it incurs for producing its products and/or services. In other words, gross margin is equal to gross income divided by net sales, and is expressed as a percentage. Gross margin is a good indication of how profitable a company is at the most fundamental level. Companies with higher gross margins will have more money left over to spend on other business operations, such as research and development or marketing.
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Definition 2.
Gross operating profit divided by sales. Gross margin is a good way to assess the profitability of the company''s core operations, aside from depreciation and other machinations and contingencies. To get an idea how the company''s current gross margin stacks up, compare it to the five-year average, also given.
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