Answer:
Gross margin is the difference between:
1) the cost to produce or purchase an item, and
2) its selling price.
For example, if a company's manufacturing cost of a product is $28 and the product is sold for $40, the product's gross margin is $12 ($40 minus $28), or 30% of the selling price ($12/$40). Similarly, if a retailer has net sales of $40,000 and its cost of goods sold was $24,000, the gross margin is $16,000 or 40% of net sales ($16,000/$40,000).
1) the cost to produce or purchase an item, and
2) its selling price.
For example, if a company's manufacturing cost of a product is $28 and the product is sold for $40, the product's gross margin is $12 ($40 minus $28), or 30% of the selling price ($12/$40). Similarly, if a retailer has net sales of $40,000 and its cost of goods sold was $24,000, the gross margin is $16,000 or 40% of net sales ($16,000/$40,000).
| Previous Question | Next Question |
| Define leverage? | Can you please explain the difference between current ratio and the quick ratio? |