Definition of 'Gross Margin'

A company's total sales revenue minus its cost of goods sold, divided by the
total sales revenue, expressed as a percentage. The gross margin represents
the percent of total sales revenue that the company retains after incurring
the direct costs associated with producing the goods and services sold by a
company. The higher the percentage, the more the company retains on each
dollar of sales to service its other costs and obligations.



Investopedia explains 'Gross Margin'

This number represents the proportion of each dollar of revenue that the
company retains as gross profit. For example, if a company's gross margin
for the most recent quarter was 35%, it would retain $0.35 from each dollar
of revenue generated, to be put towards paying off selling, general and
administrative expenses, interest expenses and distributions to shareholders.
The levels of gross margin can vary drastically from one industry to another
depending on the business. For example, software companies will generally
have a much higher gross margin than a manufacturing firm.