Gross margin
Gross margin is a profitability metric, calculated as (Revenue − COGS) ÷ Revenue.
- Layer
- Metric
- Defined in
- Metric definitions
- Nearby
- 15
Authority
This definition follows Non-GAAP financial measure — SEC Regulation G — it is not a GAAP measure, so a registrant publishing it has to reconcile it to the nearest GAAP figure.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
Formula
(Revenue − COGS) ÷ Revenue
Requires a COGS classification; omit the metric if there isn't one.
A metric without its definition is a number people argue about in meetings. Every metric component in this system requires one — see the rules.
The lesson that teaches this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
Gross margin, in use
Quoted from the 2 documents that use the word — what it does to an interface, in the spec's own sentence.
A negative number on a P&L means the line genuinely went the other way — a contra-revenue, a credit to an expense account, a negative gross margin.
If the chart of accounts has no COGS, the component omits the gross profit subtotal rather than showing a gross margin equal to revenue, which is a lie by omission.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- Gross marginRevenue less cost of revenue, as a percentage of revenue. It's what's left from each dollar of sales to pay for everything else. As a ratio, it's a metric rather than a GAAP line.
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.
- Chart of accounts for startups: a starting templateA starting chart of accounts for a US startup: number ranges, the expense accounts you need, and when to add an account versus a class or tracking tag.
- Cash vs accrual accounting for startups, and the IRS ruleCash or accrual for a startup: why investors and auditors read accrual, when the IRS lets a C-corp file on cash, and the 2026 gross receipts limit.
Nearby in the catalog
No component names this concept outright. These are the ones in its part of the system, which is a weaker claim — but a component nothing links to is a component nobody finds.
7Dashboard & charts
Family spec- MetricDefinitionEvery metric requires one. Formula with values substituted.
- NonGaapReconciliationEBITDA below net income, every adjustment named.Spec
- MrrBridgeThe movement, not a single number with a percentage.Spec
- BudgetVsActualPolarity-aware, materiality-filtered, versions tracked.
- ForecastTableProjections dashed and labeled everywhere.
- CovenantMonitorThe contractual definition, not the generic one.Spec
- KpiHealthStripProvisional marking for pre-close numbers.Spec
- RevenueTrackerRevenue by stream, with mix, growth and concentration.
- ExpenseTrackerSpend by category on three bases. Polarity derived per row from the sign convention.
- DriverModelThe inputs a forecast is built from, and what they produce.
- ScenarioCompareScenarios side by side, all measured against the base.
- PlByDimensionThe P&L cut by department, entity or product.
Terms this one depends on
- RevenueInflows or enhancements of assets, or settlements of liabilities, from delivering goods or services — recognized when control transfers, not when cash arrives
- Cost of revenueThe direct costs of producing the goods or delivering the services sold in the period — the line gross profit is measured after
Also in Profitability
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- Margin & markupThey are not the same number, and confusing them is how a price list quietly loses money.Tool
- Gross margin vs net marginGross margin is revenue less only the cost of delivering it, as a share of revenue; net margin is what is left after every cost — operating expenses, interest and tax — as a share of revenue.Compare
- Journal entry for a sale on accountFor a sale on credit, debit Accounts receivable and credit Revenue for the price; under a perpetual inventory system also debit Cost of goods sold and credit Inventory for what the goods cost. When the customer pays, debit Cash and credit Accounts receivable.Entry
Defined in Metric definitions. This page is generated from that document, so the two cannot disagree.