Gross margin is gross profit divided by revenue, expressed as a percentage — what's left after direct costs of producing the product. A company with $10M revenue and $4M COGS has 60% gross margin. Indicates pricing power and production efficiency. Software companies often achieve 75-85% gross margins; retailers 25-40%; restaurants 60-65% (food + beverage); manufacturers vary widely by industry. Track quarterly trends — declining gross margin signals pricing pressure or input cost increases. Different segments within a company can have very different gross margins (Apple's hardware ~37%, services ~70%). Investors prefer expanding gross margins as a leading indicator of business strength.
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Gross Margin
August 22, 2026 · Aditya Gupta
Accounting
Related terms
Accounts Payable
Accounts Payable (A/P) is money a company owes to suppliers for goods or services received but not yet…
Accounts Receivable
Accounts Receivable (A/R) is money owed to a company by customers for goods or services delivered on credit.…
Accrual Accounting
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Amortization
Amortization is the systematic allocation of intangible asset cost over its useful life — analogous to depreciation but…
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