eCommerce Glossary
This e-commerce glossary features over 250 essential terms every online seller should know to succeed in digital commerce.
eCommerce Glossary
This e-commerce glossary features over 250 essential terms every online seller should know to succeed in digital commerce.
This is a financial metric that represents the proportion of revenue remaining after deducting the cost of goods sold (COGS). It measures how efficiently a company is producing and selling its goods compared to its revenue.
This is a key indicator of a company’s financial health and operational efficiency. It highlights the percentage of sales revenue that exceeds the COGS, which can be used to cover other operating expenses, taxes, interest, and profit.
To calculate it, use the following formula:
Gross Margin = Revenue – Cost of Goods Sold (COGS) Revenue x100
Steps for Calculation:
Example Calculation:
– Revenue: $500,000
– COGS: $300,000
Gross Margin = ($500,000 – $300,000) $500,000 x 100 = $200,000 $500,000 x 100 = 40%
In this example, this is 40%, indicating that 40% of the revenue remains after covering the COGS, available to cover other expenses and generate profit.
By understanding and optimizing it, businesses can improve their financial performance, operational efficiency, and strategic decision-making.