How is gross profit margin expressed?

Gross profit margin is a financial metric that represents the percentage of revenue that exceeds the cost of goods sold (COGS). It is calculated using the formula:

Gross Profit Margin = (Gross Profit / Revenue) x 100

In this formula, gross profit is determined by subtracting COGS from total revenue. The result indicates how well a company generates revenue from its direct costs, which is crucial for understanding the profitability and pricing strategy of the business. Therefore, expressing gross profit margin as a percentage of gross profit to revenue accurately reflects this relationship and highlights how effectively a company is managing its production costs in relation to its sales.

This measurement is particularly useful for comparing profitability across companies in the same industry, as it provides insight into operational efficiency and can signal potential issues with pricing or cost management.