Gross Profit Margin

Gross profit margin is the revenue that a company retains post calculating the cost of goods sold (COGS). It depicts the profit that a company made prior to deducting general, selling and administrative expenses, which is the net profit margin of the company. 

The formula to calculate gross profit margin = (Total Revenue – Cost of Goods Sold) / Total Revenue.

Check out this example for better clarity on the concept: Say the financial statement of ABC company shows total revenue of ₹50 lakhs and the cost of goods sold at ₹40 lakhs. So, its gross profit margin would be 0.2% (10/50).