metrics explained

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

Gross margin and net margin are two important financial ratios that measure a company's profitability. They are both used to assess a company's financial health and to compare it to other companies in its industry.

Gross margin is a measure of a company's profitability before taking into account its expenses, taxes, and interest payments. It is calculated by subtracting the cost of goods sold from a company's total revenue.

Net margin is a measure of a company's profitability after taking into account its expenses, taxes, and interest payments. It is calculated by subtracting a company's total expenses from its total revenue.

So, what's the difference between gross margin and net margin?

Gross margin is a broader measure of profitability than net margin. It doesn't take into account a company's expenses, taxes, and interest payments, which can vary significantly from one company to another.

Net margin is a more narrow measure of profitability. It takes into account a company's expenses, taxes, and interest payments, which can have a big impact on a company's bottom line.

Both gross margin and net margin are important ratios to consider when assessing a company's financial health. They can give you a good idea of how profitable a company is and how it compares to its competitors.

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