Gross margin means after deduction of Direct Expense & Net margin means after deduction of Indirect expense its correct.?

Revenue - Direct Expense = Gross Margin

Gross Revenue - Indirect Expense = Net Margin

2 Answer(s)


Margin implies relative to the revenue..which means there should be Revenue in denominator while calculating any margin.

Gross Margin = (Revenue - COGS)/ Revenue

Net Margin = Net Profit/Revenue

where Net Profit= Revenue - COGS - Operating Expenses - Interests and Tax.


Sagar your formulas are right for Gross PROFIT and Net PROFIT.

Sandeeps forumulas are right for the corresponding margin calculations.

PROFIT is the number and MARGIN is the % exhibiting the PROFIT number as a % of revenue.

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