What is 'gross margin'?

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Multiple Choice

What is 'gross margin'?

Explanation:
Gross margin shows how much revenue is left after covering the direct costs of producing goods. It is calculated as Revenue minus Cost of Goods Sold. This tells you how efficiently production and pricing cover the cost of goods sold before any operating expenses are considered. The other ways listed don’t reflect this measure: subtracting Revenue from Net Income isn’t a meaningful margin, subtracting Revenue from Cost of Goods Sold would be the negative of the correct form, and subtracting Operating Expenses from Revenue gives operating income, not gross margin. So the correct approach is Revenue minus Cost of Goods Sold.

Gross margin shows how much revenue is left after covering the direct costs of producing goods. It is calculated as Revenue minus Cost of Goods Sold. This tells you how efficiently production and pricing cover the cost of goods sold before any operating expenses are considered. The other ways listed don’t reflect this measure: subtracting Revenue from Net Income isn’t a meaningful margin, subtracting Revenue from Cost of Goods Sold would be the negative of the correct form, and subtracting Operating Expenses from Revenue gives operating income, not gross margin. So the correct approach is Revenue minus Cost of Goods Sold.

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