™Revenue of $1 million minus $600,000 cost of sales gives $400,000 gross profit and a 40% gross margin, before operating and other expenses.
Fundamentals
Gross margin
Gross profit divided by revenue, showing what remains after direct costs under accounting rules.
Plain-English context
Put the definition to work.
Compare consistent cost-of-sales definitions and periods; gross margin does not subtract every operating expense.
Further reading and verification. Examples are hypothetical, not current quotes or recommendations. Product terms, tax treatment and market rules can change. SEC — financial statement guide