Gross Profit Margin
A financial metric that shows a company's financial health by revealing the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). A high gross profit margin indicates that a company can make a reasonable profit on sales, as long as it keeps overhead costs in control.
(Gross Profit / Total Revenue) * 100
If a company's gross profit is $400,000 and its revenue is $1,000,000, the gross profit margin is 40%. This means the company retains 40% of its total revenue after accounting for the direct costs associated with producing the goods it sells.