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BREAKING DOWN 'Gross Margin'

The gross margin number represents the portion of each dollar of revenue that the company retains as gross profit. For example, if a company's gross margin for the most recent quarter is 35%, that means it retains $0.35 from each dollar of revenue generated. It spends the remainder on COGS. As COGS have already been taken into account, the remaining funds can be put toward paying off debts, general and administrative expenses, interest expenses and distributions to shareholders.

What is 'Gross Margin'

Gross margin is a company's total sales revenue minus its cost of goods sold (COGS), divided by total sales revenue, expressed as a percentage. The gross margin represents the percent of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells. The higher the percentage, the more the company retains on each dollar of sales, to service its other costs and debt obligations.

What is customer satisfaction (CSAT)?

In customer relationship management, customer satisfaction (CSAT) is a measure of the degree to which a product or service meets the customer's expectations.

What is 'Revenue'

Revenue is the amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the top line or gross income figure from which costs are subtracted to determine net income. Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold. Revenue is also known as sales on the income statement.

What is 'Cost of Goods Sold - COGS'

Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company. This amount includes the cost of the materials used in creating the good along with the direct labor costs used to produce the good. It excludes indirect expenses such as distribution costs and sales force costs. Cost of goods sold is also referred to as "cost of sales."

What is 'Inventory'

' Inventory is the raw materials, work-in-process products and finished goods that are considered to be the portion of a business's assets that are ready or will be ready for sale. Inventory represents one of the most important assets of a business because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company's shareholder.

What is a 'Direct Cost'

A direct cost is a price that can be completely attributed to the production of specific goods or services. Some costs, such as depreciation or administrative expenses, are more difficult to assign to a specific product and therefore are considered to be indirect costs. A direct cost can be considered a variable cost if it is inconsistent and changes amounts often.

What is a 'General And Administrative Expense - G&A'

A general and administrative expense (G&A) refers to expenditures related to the day-to-day operations of a business. General and administrative expenses pertain to operation expenses rather that to expenses that can be directly related to the production of any goods or services, including rent, utilities, insurance and managerial salaries. In the company's income statement, these expenses generally appear under operating expenses.

What is a 'Gross Margin Return On Investment - GMROI

A gross margin return on investment (GMROI) is an inventory profitability evaluation ratio that analyzes a firm's ability to turn inventory into cash above the cost of the inventory. It is calculated by dividing the gross margin by the average inventory cost and is used often in the retail industry.

Most Recent Quarter 'MRQ'

A time notation denoting the measurement of a performance metric (such as earnings) using data from the previous quarter. Analysts use most recent quarter figures to determine how a metric has changed over time. MRQ information is found on a company's financial

What is an 'Interest Expense

An interest expense is the cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. It represents interest payable on any borrowings - bonds, loans, convertible debt or lines of credit. It is essentially calculated as the interest rate times the outstanding principal amount of the debt. Interest expense on the income statement represents interest accrued during the period covered by the financial statements, and not the amount of interest paid over that period. While interest expense is tax-deductible for companies, in an individual's case, it depends on his or her jurisdiction and also on the loan's purpose. For most people, mortgage interest is the single-biggest category of interest expense over their lifetimes as interest can total tens of thousands of dollars over the life of a mortgage as illustrated by the calculator below.

What is 'Average Inventory'

Average inventory is a calculation comparing the value or number of a particular good or set of goods during two or more specified time periods. Average inventory is the mean value of an inventory throughout a certain time period, which may vary from the median value of the same data set. A basic calculation for average inventory is: (Current Inventory + Previous Inventory) / 2 !--break--Since two points do not always accurately represent changes in inventory over different time periods, average inventory is frequently calculated by using the number of points needed to more accurately reflect activities across a certain amount of time.

What is 'Distribution

Distribution occurs when the trading volume of a security is greater than that of the previous day without any price increase. Distribution is the disbursement of assets from a retirement account. The assets from the account are paid directly to the retirement account holder or beneficiary either electronically or by check.

What is 'Gross Profit'

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. Gross profit will appear on a company's income statement, and can be calculated with this formula: Gross profit = Revenue - Cost of Goods Sold Gross profit is also called sales profit and gross income.