Gross margin vs net margin
Gross margin compares revenue with direct cost of goods sold. Net margin also subtracts other operating expenses. Both are useful, but they answer different questions: product economics versus overall profitability.
Example
With $10,000 revenue and $6,000 cost of goods sold, gross profit is $4,000 and gross margin is 40%. If other expenses are $1,500, net profit is $2,500 and net margin is 25%.
Common mistakes
Margin and markup are not interchangeable. Margin uses revenue as the denominator; markup uses cost. This page shows the markup equivalent so pricing and reporting decisions do not get mixed together.
References
- Corporate Finance Institute: Markup and margin concepts - accessed 2026-05-17.
Last reviewed: 2026-05-17