As a business owner, it is critical that you understand the importance of gross margin and use it to make strategic and operational decisions in your business. Later, in another blog article, I will discuss the true calculation of the COGS sold. I will also discuss the determination of GM (GM) by product or service. However, we must begin with the basics and move from there. You may use the ratio but not fully understand what is involved. I make no assumptions. Therefore, for those of you who learn better with videos, here is a very simplistic video that explains gross margin and its calculation method at the most basic level.
Gross Margin Video
According to the description on YouTube: “This video defines the gross profit margin ratio and explains its usefulness via an example.”