Gross Margin Percentage

Learning Objectives

  • Analyze the gross margin percentage of sample retailers

Gross margin = net sales – cost of goods sold. However, to express this as a percentage, gross margin is divided by net sales (gross margin dollars / net sales). This allows the retailer to assess what portion of sales were spent on COGS to generate the sales and what portion remains to cover operating expenses. That is:

  • 1 – gross margin percent = the portion of sales spent as COGS
  • 1 – (COGS / net sales) = gross margin percent

Practice Questions

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