Markets · 6 pages · 12 min

How gross margin and net margin answer different questions

Gross margin asks what remains after the cost of the goods, and net margin asks what remains after every other cost.

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From the opening

Gross margin subtracts the cost of goods sold from revenue and asks what is left after the direct cost of what was sold. Net margin continues through operating costs, interest, taxes, and other items, and asks what is left as profit after the whole path from revenue to the bottom. The opening covers gross stops at product cost, net continues to the bottom, and overhead sits between them.

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Inside

Gross stops at product cost
Net continues to the bottom
Overhead sits between them
Interest hits the net line
Where the idea stops applying
A distinction worth keeping

Sources

Gross profit after cost of goods
Net income margin staircase

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How gross margin and net margin answer different questions

From the opening

Inside

Sources

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