Gross margin is the amount remaining after a retailer or manufacturer subtracts the cost of goods sold from the net sales.
Gross margin is important because it shows whether your sales are sufficient to cover your costs.
A good gross margin in one industry is not necessarily good for another.
Formula to calculate gross margin.
![Calculate Gross Margin.](https://www.learntocalculate.com/wp-content/uploads/2020/06/GROSS-MARGIN.png)
Example:
Suppose a firm’s net sales for the previous year is $2,000,000 and the cost of goods sold was $700,000. Calculate the firm’s gross margin.
![](https://www.learntocalculate.com/wp-content/uploads/2020/06/GROSS-MARGIN-2.png)
Therefore, the gross margin of the firm is $ 1,300,000.