Gross Margin (%)
Gross Margin = Gross Profit/Turnover
Gross Margin shows the proportion of turnover left over after the deduction of direct costs for the business e.g. purchases of goods and materials.
This key figure is most useful for trading, manufacturing and production companies.
Things to keep in mind
- A higher margin is usually positive as it shows that companies are increasing their earnings against their turnover.
- Industries with large costs often have a low Gross Margin.