Gross margin
Definition · Level 9 · Valuation
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(Revenue − cost of goods sold) ÷ revenue: the share of each sales dollar left after the direct cost of making or delivering the product.
Example
Revenue 800, COGS 520 → gross profit 280 → 35%.
Where Tradecraft teaches it
Level 9 · Valuation, in the lesson “The income statement: top line to bottom line”: Walk from revenue to net income, read the margins, and know what EBITDA hides.
Related terms
- Bottom lineNet income: the profit left for shareholders after all costs, interest and taxes; divided by the share count it gives EPS.
- COGSCost of goods sold: the direct cost of producing what was sold in the period — materials, factory labor, freight, or hosting for a software firm.
- Depreciation & amortization (D&A)Non-cash charges that spread the cost of long-lived assets over their useful lives: the first for physical assets (plants, equipment, servers), the…
- EBITOperating income: revenue minus COGS and operating expenses (SG&A, R&D, D&A), before interest and taxes.
- EBITDAOperating income with depreciation and amortization added back — capital-structure-neutral and a rough proxy for pre-tax operating cash.
- Income statementThe report of a period's revenue, costs and profit — a quarter or a year — walking from sales at the top down to net income at the bottom.