What is the difference?

Gross Profit vs Gross Margin

Gross Profit

Gross Margin

What is it?

Gross Profit is the amount left over from total revenues after Cost of Goods Sold (COGS) has been deducted. COGS will typically include the cost of making and selling the product or the cost of services provided by the company.

Gross Margin is a profitability ratio that measures Gross Profit as a percentage of total revenue. Typically, it is calculated as Gross Profit divided by Revenue.

Who is it for?

Chief Financial Officer

Financial Analyst

Accountant

Controller

Chief Financial Officer

Financial Analyst

Customer Support Manager

DevOps Manager

Accountant

Controller

Formula

ƒ Sum(Revenue) - Sum(COGS)

ƒ Sum(Gross Profit) / Sum(Revenue)

Example

An Oil & Gas company generated a total revenue of $1 million in 2019, and incurred a COGS of $400,000 in that same year. Therefore, the company's gross profit for 2019 was $600,000.

If a florist has a revenue of $15,000 and Cost of Goods Sold is $6,000, their Gross Margin will be: ($15,000 - $6,000) / $15,000 = 60%