REVENUE & COST-OF-SALES RATIOS
Gross Margin
Gross margin commonly expresses gross profit as a percentage of revenue: revenue less cost of sales, divided by revenue. Some reports use gross margin for the monetary subtotal, so label the measure clearly.
GROSS MARGIN IN PRACTICE
- Define the inputsMatch revenue and cost of sales.
- Calculate the percentageDivide gross profit by revenue.
- Interpret the scopeReview costs excluded from the subtotal.
Use the agreed units, actual records and approved procedures for your operation.
A WORKED EXAMPLE
100 revenue. 60 cost. 40% gross margin.
In a simplified example, revenue of 100 and cost of sales of 60 leave gross profit of 40. Gross margin is 40 ÷ 100 = 40%. Markup on cost would instead be 40 ÷ 60, approximately 66.7%.
WHAT THIS MEANS FOR YOUR QUOTE
Agree the requirement before comparing quotes
Use the actual shipment, stock and service requirements. Record the billing unit, included work and responsibility for exceptions.
Put this term to work. Use the 3PL pricing and rates guide for the wider invoice context and the guide to comparing 3PL quotes to compare the same scope, activity profile and billing units.
A LITTLE MORE CONTEXT
Questions about Gross Margin
Is margin the same as markup?
No. Their denominators differ.
Is gross margin net profit?
No.
Can the term mean an amount in some reports?
Yes. Label and define the measure.
Source & example notes
SEC: financial statement fundamentals.
Sources provide background on the linked topic. Product documentation describes a particular implementation; confirm the rules, contract and procedures that apply to your operation.
Quantities, costs and scenarios are illustrative, not operating targets, approved handling instructions or guarantees. Source guidance reviewed 22 October 2026.
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