What is gross margin? Formula, ranges and example
What is gross margin?
Gross margin measures gross profit relative to revenue. Divide gross profit by revenue and multiply by 100 to express it as a percentage. Gross profit is revenue less cost of sales, before selling, general and administrative expenses and other subsequent costs.
Formula
Gross margin (%) = gross profit ÷ revenue × 100 (gross profit = revenue − cost of sales)
- Use reported gross_profit first; when it is absent, derive it as net_sales − cost_of_sales on the same period, accounting standard, consolidation scope and currency.
- For companies reporting operating revenue, use the corresponding gross profit and cost on that revenue basis; do not mix different revenue concepts.
- Missing required inputs, zero revenue, or an invalid cost-of-sales sign in the derivation make the margin unavailable, not zero.
- The API returns gross_margin as a fraction: 0.1 = 10%. The sign interpretations below apply when revenue is positive.
Ranges and interpretation
| Range | Interpretation |
|---|---|
| <0% | A gross loss when revenue is positive. |
| 0% | Gross break-even when revenue is positive; this does not mean selling, general and administrative expenses are covered. |
| >0% | A gross profit when revenue is positive, not necessarily an operating or net profit. |
Worked example from a filing
Year ended March 31, 2026 (–)
IFRS · Consolidated · JPY
| Input | JPY million |
|---|---|
| Revenue | 50,684,952 |
| Cost of sales | 39,141,418 |
(50,684,952 − 39,141,418) ÷ 50,684,952 × 100 = 22.8%
For the year ended March 31, 2026, subtracting Toyota’s cost of sales from revenue gives about ¥22.8 of gross profit per ¥100 of revenue. Both inputs are consolidated IFRS annual figures from the same filing. Gross profit in this example is derived, not a separately filed line.
Source elements
- Revenue
- filer:TotalNetRevenuesIFRS
- CurrentYearDuration
- Cost of sales
- jpigp_cor:CostOfSalesIFRS
- CurrentYearDuration
What to watch
- Industry, business model and the classification of costs between cost of sales and operating expenses affect comparisons.
- Gross profit differs from operating profit, net profit and cash flow.
- Banks, insurers and brokers may not report the inputs needed for this metric.
- The national ranking uses latest annual figures with a 100% gross-margin cap to filter outliers, not a health benchmark.