what is gross profit margin 
gross profit margin is a financial metric analysts use to assess a company s financial health it is the profit remaining after subtracting the cost of goods sold cogs in simple terms gross profit margin shows the money a company makes after accounting for its business costs this metric is usually expressed as a percentage of sales also known as the gross margin ratio a typical profit margin falls between 5 and 10 but it varies widely by industry 1gross profit is the total profit a company makes after deducting its costs calculated as total sales or revenue minus the cost of goods sold cogs and expressed as a dollar value gross profit margin is the profit a company makes expressed as a percentage formula and calculation of gross profit margina company s gross profit margin is calculated using the following formula gross profit margin net sales cogs net sales begin aligned text gross profit margin frac text net sales text cogs text net sales end aligned gross profit margin net salesnet sales cogs first subtract the cogs from a company s net sales which is its gross revenues minus returns allowances and discounts then divide this figure by net sales to calculate the gross profit margin as a percentage analysts use a company s gross profit margin to compare its business model with its competitors for business owners it s crucial to understand not just gross profits but also other profit margins like operating profit margin and net profit margin to assess your business s profitability after accounting for costs like inventory salaries and rent 2