Gross Margin Definition & Meaning | Fundamental Analysis | CSIMarket
CSI Market
Sign In | Register

Glossary

Gross Margin

Fundamental Analysis

Gross margin is a financial metric used by businesses to determine the profitability of their products or services. It is a measure of the difference between the revenue generated by sales and the cost of goods or services sold. Gross margin is expressed as a percentage of revenue and is usually calculated on a periodic basis.

Gross margin is one of the key metrics used in Fundamental Analysis, which is a method of evaluating the intrinsic value of a company by examining its financial and economic data. It helps investors and analysts to understand the profitability of a company and how efficiently it is conducting its operations.

The formula for calculating gross margin is:

Gross Margin = ((Revenue - Cost of Goods Sold) / Revenue) n 100%

In this formula, revenue represents the total amount of money earned by a company from sales. Cost of goods sold refers to the direct costs associated with producing or providing goods or services for sale. These costs include materials, labor, and overhead expenses.

For example, if a company generates $100,000 in revenue from sales and has $60,000 in cost of goods sold, its gross margin would be:

((100,000 - 60,000) / 100,000) n 100% = 40%

This means that the company retains 40 cents in profit for every dollar of revenue earned, after accounting for the cost of goods sold. Higher gross margins indicate greater profitability, while lower gross margins may suggest inefficiency or competition from other companies offering similar products or services.




More Glossary Terms Beginning with G
  • G20
    The G-20 is an informal forum that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. By contributing to the strengthening of the international financial architecture and providing opportunities for dialogue on national policies, international co-operation, and international financial institutions, the G-20
    Economy Term Letter: G
  • G7
    A group of seven industrialized nations including Canada, France, Germany, Italy, Japan, United Kingdom, and the United States.
    Economy Term Letter: G
  • G8
    The finance ministers and central bank governors of the group of eight countries consisting of Canada, France, Germany, Italy, Japan, Russia, U.S. and U.K.
    Economy Term Letter: G
  • GAAP
    Generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession and that are appl
    Financial Term Letter: G
  • GAAP Combined Ratio
    The sum of the loss and LAE ratio, the underwriting expense ratio and, where applicable, the ratio of dividends to policyholders to net premiums earned. A combined ratio under 100% generally indicates an underwriting profit. A combined ratio over 100% generally indicates an underwriting loss.
    Insurance Term Letter: G
  • GAFO Retail
    GAFO represents sales at stores that sell merchandise normally sold in department stores. GAFO includes the following kinds of retail businesses: General merchandise stores. Clothing and clothing accessories stores. Furniture and home furnishings stores. Electronics and appliance stores. Sporting goods, hobby, book, and music stores. Office supplies, stationery, and gift stores.
    Economy Term Letter: G
  • Gal
    U.S. customary liquid gallon, measure of liquid capacity, legally defined as 231 cubic inches is equal to 3.78541 litres
    Energy Term Letter: G
  • Galvanizing
    The process of coating iron or steel with rust-resistant zinc. Iron & Steel Industry Operating Statistics
    Manufacturing Term Letter: G
  • Gene
    A gene is a unit of information that specifies the structure of one or more gene products. Collectively, genes determine the precise composition of all molecules needed for maintenance of the functions of life: reproduction, development, organization, growth and metabolism. Genes are often referred to as units of heredity because they pass on the information necessary for all characteristics of an
    Health Care Term Letter: G
  • Gene Products
    The products of genes are the thousands of different chemical structures, called molecules, needed for development of all cells. Most gene products are proteins. Most proteins are enzymes, molecules that can carry out work such as digesting and utilizing food for energy, signaling the cell to produce other gene products in response to changing conditions in the body, and controlling cell growth. W
    Health Care Term Letter: G
  • Genomics
    method of identifying target genes. The study, including sequencing, of molecules that carry an organisms genetic code (nucleic acids, DNA and RNA).
    Health Care Term Letter: G
  • Genotype
    the DNA gene sequence makeup that distinguishes one type of organism from another.
    Health Care Term Letter: G