Gross Profit Margin Metric

The Gross Profit Margin KPI measures how much profit you make on each dollar of sales before expenses. This ratio is calculated by looking at the difference between production costs (excluding overhead, payroll, and taxes). It is important to note that gross profit margin isn't a true indicator of whether your business is marking a profit – for that you will need to refer to another financial KPI: Net Profit Margin.

Formula

Gross profit margin = Gross profit / Total revenue

Note: Gross Profit and Total Revenue can be found on the income statement.