Gross vs. Net Profit Margin
Profit margins are key indicators of a company's financial health and pricing strategy.
- Gross Profit Margin: Measures the percentage of revenue that exceeds the Cost of Goods Sold (COGS). It shows how efficiently a company produces its goods or services.
- Net Profit Margin: The "bottom line." It shows what percentage of revenue remains as profit after *all* expenses, including operating costs, interest, and taxes, have been paid.
Why It Matters
High margins suggest a business has a strong competitive advantage, low production costs, or high pricing power. Low margins may indicate high competition or inefficiency.