How to Calculate Gross Profit Margin

Gross profit is a fairly simple comparison of the cost of the goods your company sells to the income derived from those goods. Gross profit margin is the ratio of gross profit to total revenue expressed as a percentage. Gross profit margin is a quick yet useful way to meaningfully compare your company to competitors or average industry values. It can also be used to compare your company's current state to its past performance, especially in markets where the price of your goods can fluctuate significantly.