It represents the percentage of total sales revenue that your company retains after incurring the direct costs associated with producing the goods and services sold.
The higher the margin, the more your company can retain bulk sms thailand on each dollar of sales to cover its other costs and liabilities.
It can be calculated in the following ways:
gross margin - gross margin formula
What is the difference between profit margin and gross margin?
They are often confused, but at the end of the day they are two completely different metrics.
Profit margin is the money earned on a sale minus the direct costs of a sale, and gross margin is the profit expressed as a percentage of sales.
However, some companies prefer to use this calculation and express it as a percentage or in euros.
If you have sales of €100, but it costs you €40 in raw materials and labor, you are left with a profit of €60, and a gross margin of 60% or €60.
On the income statement, you will have many other expenses below the gross margin, for example, operating expenses, interest, taxes.
So this metric is not a complete picture of your profit; just look at the amount of money left after the direct costs of the sale.
Another example:
You run a home cooking business, and you send a cook to work at a home for a couple of hours.
You plan to bill €50, but you will pay your cook €20, and kitchen supplies cost €4.
