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Gross Sales and Gross Margin

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You may have heard of "gross sales" or "gross margin". What do these mean?

If you own an inventory-based business, it's really important that you understand these terms.

Gross means the total.  

Gross sales is the total of our transactions.

Your gross margin is the difference between your sales and the cost of goods for your sales.

So when you sell something, subtract your cost related to that item (COGS) from the sales price (revenue). Then divide that number by the sales price to get your gross profit margin (multiply this number by 100 to see the percentage).

Here's what the gross margin formula looks like:

Gross Margin = (revenue-COGS)/revenue


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