Gross Margin
The percentage of revenue remaining after subtracting the cost of goods sold (COGS).
Definition
Gross margin measures the percentage of revenue that exceeds the cost of goods sold. It indicates how efficiently a company produces its goods or services and is crucial for understanding unit economics.
How to Calculate
Gross Margin = (Revenue - COGS) / Revenue × 100
Real-World Example
SaaS Company: $1M revenue with $200K in hosting and support costs
Gross Margin = ($1M - $200K) / $1M × 100 = 80%