# gross profit margin

## Definition

What remains from sales after a company pays out the cost of goods sold. To obtain gross profit margin, divide gross profit by sales. Gross profit margin is expressed as a percentage.

For example, if a company receives \$25,000 in sales and its cost of goods sold were \$20,000, the gross profit margin would be equal to \$25,000 minus \$20,000, divided by \$25,000, or 20%. Basically, 20% gross profit margin means that for every dollar generated in sales, the company has 20 cents left over to cover basic operating costs and profit.

For more information, see Net vs Gross.

## Use gross profit margin in a sentence

I wondered what the gross profit margin was going to be and how it would effect our day to day dealings.

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When my boss evaluated sale and cost, he realized that his gross profit margin was very low so he started to find ways to increase it.

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The gross profit margin was substantial and this metric was mentioned during the weekly team meeting as a ratio to be referenced often.

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