Gross Margin is the difference between revenue and the cost of goods sold (COGS), expressed as a percentage of revenue. It indicates how efficiently a company uses its resources to produce and sell products or services, showing the proportion of money left over from revenues after accounting for the cost of goods sold.

Gross Margin is calculated by subtracting the cost of goods sold from total revenue and then dividing by total revenue. The result is expressed as a percentage.

1. Basic Example: A company has revenue of $500,000 and COGS of $300,000. The gross margin is:

\begin{align}\text{Gross Margin}&=\left(\frac{500,000 - 300,000}{500,000}\right) \times 100\cr&=40\%\end{align}

2. Service Example: A software company generates $200,000 in revenue with a COGS of $50,000. The gross margin is:

\begin{align}\text{Gross Margin}&= \left(\frac{200,000 - 50,000}{200,000}\right) \times 100\cr&= 75\%\end{align}