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In finance, a company"s gun margin is just the difference in between revenue and also cost of items sold (COGS) separated by the revenue figure. Unlike gross profits, which space expressed as pure dollar amounts, gross margins space expressed in portion forms.

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GrossMargin=(Revenue−COGSRevenue)×100where:COGS=Costofgoodssold\beginaligned &\textGross Margin = \left ( \frac \textRevenue - \textCOGS \textRevenue \right ) \times 100 \\ &\textbfwhere: \\ &\textCOGS = \textCost of items sold \\ \endaligned​GrossMargin=(RevenueRevenue−COGS​)×100where:COGS=Costofgoodssold​

Gross margin is simply one measurement of a company"s profitability, since it solely factors the expenses of doing service directly pertained to production. To more refine this profitability metric, a agency next normally deducts every one of its common overhead and also operating expenses, consisting of wages, and also any administrative, facilities, marketing, and also advertising costs. The number that continues to be after subtracting these worths is known as the operation margin, which is additionally known by the expression "earnings prior to interest and also taxes, or EBIT."

The final profitability calculation, which mirrors a company's really net revenues or net profit margin, subtracts interest, taxes, gains, or losses indigenous investments, and any various other extraneous costs the agency may have actually incurred, the weren't contained in the calculations for gross margin or operation margin.