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Gross profit margin (GPM) is a financial metric used to assess a company's profitability by calculating the percentage of revenue that remains after deducting the cost of goods sold (COGS).Â
It shows how much money a business makes from each dollar of sales revenue after deducting the cost of making the products or providing the services that are sold.
The formula for calculating GPM is as follows:
GPM = (Revenue - COGS) / Revenue x 100%
While COGS covers all costs incurred in manufacturing and delivering these goods or services, such as raw material, labor, and overhead expenditures, revenue is the entire amount of money a business makes from selling its goods or services.
A greater GPM signifies that a business is working effectively and efficiently since it can make more money from every dollar of sales revenue. In contrast, a lower GPM could mean that a business is having trouble maintaining its profitability, either as a result of excessively high costs or excessively low prices.
Investors and analysts frequently use GPM to compare the profitability of various businesses operating in the same sector or industry. It may also be utilized to follow a
The formula for calculating GPM is as follows:
GPM = (Revenue - COGS) / Revenue x 100%
While COGS covers all costs incurred in manufacturing and delivering these goods or services, such as raw material, labor, and overhead expenditures, revenue is the entire amount of money a business makes from selling its goods or services.
A greater GPM signifies that a business is working effectively and efficiently since it can make more money from every dollar of sales revenue. In contrast, a lower GPM could mean that a business is having trouble maintaining its profitability, either as a result of excessively high costs or excessively low prices.
Investors and analysts frequently use GPM to compare the profitability of various businesses operating in the same sector or industry. It may also be utilized to follow a
