How do you read Gross margin?

High in software and drugs, low in retail and commodities: it compares best within an industry and against the company's own past.

Gross margin

Profitability

What is left of each dollar of revenue after the cost of the product itself.

How it is worked out

(Revenue less cost of goods sold) divided by revenue.

How to read it

High in software and drugs, low in retail and commodities: it compares best within an industry and against the company's own past.

Example

Revenue 100, cost of goods 60: a 40% gross margin.

Related terms

Operating marginWhat is left of each dollar of revenue after running costs too (salaries, research, marketing).
Net marginWhat is left of each dollar of revenue at the end, after every cost, interest and tax.

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Explanations of terms for learning, with examples from SEC filings.