Gross Margin
Gross profit as a percentage of revenue, showing what proportion of each sale survives the direct cost of producing it.
Formula
Gross Margin = (Revenue - Cost of Goods Sold) / Revenue x 100
Unit
%
In depth
Gross margin measures the economics of the product before the cost of running the company, and its stability through an input-cost cycle is one of the clearest tests of pricing power. A company that holds its gross margin while raw material prices rise is passing costs through; one whose margin compresses is absorbing them. Because the boundary between direct and indirect costs varies by company and industry, gross margins compare well within a sector and badly across sectors. Indian filings frequently omit an explicit gross profit line, so it must be built from the cost components.
Worked example
Revenue ₹1,000 crore and cost of goods sold ₹600 crore give a gross margin of 400 / 1,000 = 40%. If input costs rise 10% next year and the margin holds at 40%, the entire increase was passed to customers.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Gross Margin” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.