metrics explained

Gross Margin vs Net Margin: What's the Difference?

Gross margin and net margin are two important financial metrics that are used to assess a company's profitability. Gross margin is a company's profit before taxes and other expenses are deducted, while net margin is a company's profit after all expenses have been deducted.

Gross margin is a company's profit before taxes and other expenses are deducted. To calculate gross margin, simply take a company's total revenue and subtract its total cost of goods sold (COGS). This will give you the company's gross profit. From there, you can divide gross profit by total revenue to get the gross margin percentage.

Net margin is a company's profit after all expenses have been deducted. To calculate net margin, start with a company's total revenue and subtract its COGS, as well as its operating expenses, interest expenses, and tax expenses. This will give you the company's net profit. You can then divide net profit by total revenue to get the net margin percentage.

Gross margin and net margin are both important financial metrics that can give you a good idea of a company's profitability. However, they are not the same thing. Gross margin is a company's profit before taxes and other expenses are deducted, while net margin is a company's profit after all expenses have been deducted.

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