What is Gross Profit Margin? Gross profit margin is the percentage of sales revenue that a company is able to convert into gross profit. Companies use gross profit margin to determine how efficiently they generate gross profit from sales of products or services. What Does Gross Profit Margin Tell You & Why Is It Important Gross profit margin is good yardstick for measuring how efficiently companies make money from products and services, because it measures profit as a percentage of sales revenue. It can therefore be used to more easily compare companies with different sales revenues. Gross profit margin also homes in on sales revenue, eliminating general corporate expenses as well as other costs and income that impact a company's overall profitability, such as legal settlements or income from interest. Gross profit margin is sometimes used as an indicator of how well a company is managed.
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