What is Gross Margin?
Gross margin is gross profit shown as a percentage of the selling price: (selling price minus cost) divided by selling price.
Updated
Meaning
English
Gross margin is gross profit shown as a percentage of the selling price: (selling price minus cost) divided by selling price.
Roman Urdu
Gross margin gross profit ko selling price ke percentage me dikhata hai: (qeemat minus cost) taqseem qeemat.
Also called margin, profit margin, GP margin, gross profit margin.
Example
A shop buys a cooking oil bottle for 520 rupees and sells it for 580. Gross profit is 60 rupees, and gross margin is 60 divided by 580, about 10.3%.
How it works
Margin answers "out of every 100 rupees I take at the counter, how much is mine before expenses?" It is the number to compare across products and categories. In Pakistani retail, staples like flour, sugar and oil run on thin margins, while cosmetics, accessories and stationery usually carry wider ones.
Margin and markup are often mixed up. A 25% markup on cost is only a 20% margin on price. Discounts come straight out of margin: a 5% discount on a 10% margin item takes half the profit. Watch margin by category every month; a fall usually means costs rose and selling prices were not updated.
In Nafaa
The Nafaa product editor shows margin as the price is typed, and the profit report shows earnings by product, category, brand and supplier at the cost saved on each bill line, after discounts and returns.
Related terms
- Markup
Markup is the amount added to the cost price to get the selling price, usually expressed as a percentage of cost.
- Gross Profit
Gross profit is sales minus the cost of the goods sold, before rent, salaries, bills and other expenses are taken off.
- COGS (Cost of Goods Sold)
Cost of goods sold is the purchase cost of the items a business actually sold in a period, which is subtracted from sales to find gross profit.
- Discount
A discount is a reduction from the normal selling price, given as a fixed amount or a percentage on an item or a whole bill.