Gross profit is revenue minus the direct costs of producing goods or services (COGS). It represents the efficiency of production and pricing strategy. Gross profit margin = (Revenue − COGS) / Revenue × 100%.
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Pro Tip
Track gross margin trend over time, not just the absolute number. A declining gross margin often signals pricing pressure or rising input costs before they become a crisis.
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Did You Know?
Apple's gross margin on iPhone is estimated at 50–55%, significantly higher than most hardware companies. This is driven by premium pricing and tightly controlled manufacturing.
References
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