{"id":296567,"date":"2025-08-11T16:28:15","date_gmt":"2025-08-11T04:28:15","guid":{"rendered":"https:\/\/www.reckon.com\/au\/?post_type=glo&#038;p=296567"},"modified":"2025-08-11T16:28:27","modified_gmt":"2025-08-11T04:28:27","slug":"gross-profit-margin","status":"publish","type":"glo","link":"https:\/\/www.reckon.com\/au\/glossary\/gross-profit-margin\/","title":{"rendered":"Gross Profit Margin"},"content":{"rendered":"<p>[et_pb_section fb_built=&#8221;1&#8243; custom_padding_last_edited=&#8221;off|desktop&#8221; _builder_version=&#8221;4.27.2&#8243; custom_margin=&#8221;0px||0px||false|false&#8221; custom_padding=&#8221;0px||0px||false|false&#8221; custom_padding_phone=&#8221;0px||||false|false&#8221; da_disable_devices=&#8221;off|off|off&#8221; locked=&#8221;off&#8221; global_colors_info=&#8221;{}&#8221; da_is_popup=&#8221;off&#8221; da_exit_intent=&#8221;off&#8221; da_has_close=&#8221;on&#8221; da_alt_close=&#8221;off&#8221; da_dark_close=&#8221;off&#8221; da_not_modal=&#8221;on&#8221; da_is_singular=&#8221;off&#8221; da_with_loader=&#8221;off&#8221; da_has_shadow=&#8221;on&#8221;][et_pb_row column_structure=&#8221;1_3,2_3&#8243; _builder_version=&#8221;4.27.2&#8243; background_size=&#8221;initial&#8221; background_position=&#8221;top_left&#8221; background_repeat=&#8221;repeat&#8221; width=&#8221;100%&#8221; custom_margin=&#8221;0px||0px||false|false&#8221; custom_padding=&#8221;0px||0px||false|false&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;1_3&#8243; module_class=&#8221;table-contents&#8221; _builder_version=&#8221;4.23&#8243; background_color=&#8221;#f3f2f6&#8243; custom_padding=&#8221;25px||25px||true|false&#8221; sticky_position=&#8221;top&#8221; sticky_limit_bottom=&#8221;section&#8221; sticky_position_tablet=&#8221;top&#8221; sticky_position_phone=&#8221;none&#8221; sticky_position_last_edited=&#8221;on|desktop&#8221; pac_dcm_carousel_specific_module_num=&#8221;0&#8243; border_radii=&#8221;on|24px|24px|24px|24px&#8221; global_colors_info=&#8221;{}&#8221; custom_padding__hover=&#8221;|||&#8221;][et_pb_text _builder_version=&#8221;4.23&#8243; text_font=&#8221;||||||||&#8221; global_colors_info=&#8221;{}&#8221; background__hover_enabled=&#8221;on|desktop&#8221;][\/et_pb_text][\/et_pb_column][et_pb_column type=&#8221;2_3&#8243; _builder_version=&#8221;4.16&#8243; custom_padding=&#8221;|||&#8221; pac_dcm_carousel_specific_module_num=&#8221;0&#8243; global_colors_info=&#8221;{}&#8221; custom_padding__hover=&#8221;|||&#8221;][et_pb_text admin_label=&#8221;Definition description + related terms&#8221; _builder_version=&#8221;4.27.4&#8243; header_2_font_size=&#8221;32px&#8221; header_2_font_size_tablet=&#8221;30px&#8221; header_2_font_size_phone=&#8221;26px&#8221; header_2_font_size_last_edited=&#8221;on|tablet&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p>Gross profit margin, or gross margin, is an essential accounting metric that indicates the financial health of your business. Gross profit margin is often presented as a percentage and is calculated by subtracting your cost of goods sold (<a href=\"https:\/\/www.reckon.com\/au\/small-business-resources\/starting-a-small-business\/what-is-and-how-calculate-cost-of-goods-sold\/\">COGS<\/a>) from revenue.<\/p>\n<h2>Gross profit margin formula<\/h2>\n<p>To calculate <a href=\"https:\/\/www.reckon.com\/au\/glossary\/how-to-calculate-gross-profit-margin\/\">gross profit margin<\/a>, you subtract your cost of goods sold from your revenue and divide the total by your revenue<\/p>\n<p>[\/et_pb_text][et_pb_image src=&#8221;https:\/\/www.reckon.com\/au\/wp-content\/uploads\/2024\/05\/gross-profit.png&#8221; alt=&#8221;Gross profit margin definition &#038; formula&#8221; title_text=&#8221;Gross Profit&#8221; align=&#8221;center&#8221; _builder_version=&#8221;4.27.4&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_image][et_pb_text _builder_version=&#8221;4.27.4&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<h2>Gross profit margin vs net profit margin<\/h2>\n<p>Gross profit margin and net profit margin provide different insights into the financial health of your business.<\/p>\n<ul>\n<li>Gross profit margin is calculated by subtracting your COGS from your revenue generated.<\/li>\n<li><a href=\"https:\/\/www.reckon.com\/au\/glossary\/net-profit\/\">Net profit<\/a> margin is calculated by subtracting all expenses from your total revenue.<\/li>\n<\/ul>\n<p>Businesses and accountants will use gross profit margin to find out the profitability of a business&#8217;s products relative to the cost of goods sold. To find the profitability of the company relative to its production to operating costs, interest, and taxes, a business will use net profit margin:<\/p>\n<p style=\"text-align: center;\"><em><strong>Net profit margin = (Revenue &#8211; All Costs) \/ Revenue x 100<\/strong><\/em><\/p>\n<h2>Operating profit margin<\/h2>\n<p>Operating profit margin is another accounting metric used to find the profitability associated with a business&#8217;s <a href=\"https:\/\/www.reckon.com\/au\/glossary\/operating-expenses\/\">operating expenses<\/a>. The operating profit margin formula is calculated as:<\/p>\n<p style=\"text-align: center;\"><em><strong>Operating profit margin = (Gross Revenue &#8211; Operating expenses \/ Revenue x 100)<\/strong><\/em><\/p>\n<h2>Good profit margin<\/h2>\n<p>Gross profit margin is a quick metric that businesses can use to determine the financial health of their operations. For instance, a textile company with a gross margin of 75% would be considered above average in most industries. A good gross profit margin is around 50-70%.\u00a0<\/p>\n<p>Higher profit margins indicate efficient operations, whereas lower margins indicate that improvement is needed to maintain profitability. As you calculate using different metrics (gross, operating, and net profit margin formulas), your margins will shrink as more costs are accounted for. Depending on the type of business you run, industry averages vary.<\/p>\n<p>[\/et_pb_text][et_pb_text admin_label=&#8221;Related terms&#8221; _builder_version=&#8221;4.27.4&#8243; header_2_font_size=&#8221;32px&#8221; header_2_font_size_tablet=&#8221;30px&#8221; header_2_font_size_phone=&#8221;26px&#8221; header_2_font_size_last_edited=&#8221;on|tablet&#8221; locked=&#8221;off&#8221; global_colors_info=&#8221;{}&#8221;]<\/p>\n<p><strong>See related Terms:<\/strong><\/p>\n<p><a href=\"https:\/\/www.reckon.com\/au\/glossary\/gross-profit\/\">What is gross profit?<\/a><br \/><a href=\"https:\/\/www.reckon.com\/au\/glossary\/gross-profit-vs-net-profit\/\">Gross profit vs net profit<\/a><br \/><a href=\"https:\/\/www.reckon.com\/au\/glossary\/marginal-cost\/\">What is marginal cost?<\/a><\/p>\n<p>[\/et_pb_text][ba_social_share icon_bg=&#8221;#03002e&#8221; icon_padding=&#8221;10px|12px|10px|12px|true|true&#8221; layout=&#8221;classic&#8221; show_text=&#8221;off&#8221; btn_padding=&#8221;0px|0px|0px|0px|false|false&#8221; btn_bg_color=&#8221;RGBA(255,255,255,0)&#8221; _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; custom_margin=&#8221;50px||||false|false&#8221; custom_padding=&#8221;25px||||false|false&#8221; custom_css_before=&#8221;    content: %22SHARE THIS%22;||    font-size: 16px;||    font-weight: 700;||    line-height: 22px;||    letter-spacing: 0em;||    text-align: center;||    color: #ff5447;||    margin-bottom: 10px;||    display: inline-flex;||    position: absolute;||    margin-top: 10px;&#8221; border_width_top_main=&#8221;1px&#8221; border_color_top_main=&#8221;#e4e4e4&#8243; border_radii_icon=&#8221;on|5px|5px|5px|5px&#8221; global_colors_info=&#8221;{}&#8221; custom_css_before_last_edited=&#8221;off|desktop&#8221;][ba_social_share_child _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/ba_social_share_child][ba_social_share_child network_type=&#8221;facebook&#8221; _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/ba_social_share_child][ba_social_share_child network_type=&#8221;linkedin&#8221; _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/ba_social_share_child][ba_social_share_child network_type=&#8221;email&#8221; _builder_version=&#8221;4.23&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/ba_social_share_child][\/ba_social_share][\/et_pb_column][\/et_pb_row][\/et_pb_section]<\/p>\n","protected":false},"excerpt":{"rendered":"<p><!--TOC-->Gross profit margin, or gross margin, is an essential accounting metric that indicates the financial health of your business. Gross profit margin is often presented as a percentage and is calculated by subtracting your cost of goods sold (COGS) from revenue. Gross profit margin formula To calculate gross profit margin, you subtract your cost of [&hellip;]<\/p>\n","protected":false},"author":36,"featured_media":0,"menu_order":0,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"class_list":["post-296567","glo","type-glo","status-publish","format-standard","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.4 (Yoast SEO v27.4) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Gross Profit Margin Explained: What Is Gross Profit Margin?<\/title>\n<meta name=\"description\" content=\"Gross profit margin is an important financial metric that accountants and businesses use to calculate the health of a business. 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