Resources  ❯  Accounting Terms

Gross Margin

[grohs MAR-jin]

What is the definition of Gross Margin?
The financial metric calculated by subtracting the cost of goods sold from net sales, representing the portion of sales revenue that exceeds the direct costs associated with producing the goods sold by a company.
Using Gross Margin in an Example

For example, if a company's net sales are $1,000,000 and the cost of goods sold is $600,000, the gross margin would be $400,000. This figure represents the amount of revenue remaining to cover operating expenses and profit.

Using Gross Margin in a sentence

During the financial meeting, the CFO highlighted the improvement in gross margin as a key indicator of enhanced operational efficiency and cost management.

Related Terms

GAAP

Generally Accepted Accounting Principles (GAAP) are the conventions, rules, and procedures that define accepted accounting practice in the United States, established by the Financial Accounting Standards Board (FASB).
Learn More

GAAS

Generally Accepted Auditing Standards (GAAS) are a set of systematic guidelines used by auditors when conducting audits on companies' finances, ensuring the accuracy, consistency, and verifiability of auditors' actions and reports.
Learn More

GAO

The Government Accountability Office (GAO) is the auditing, evaluation, and investigative arm of the United States Congress. It is an independent, nonpartisan agency that reviews federal financial transactions and reports its findings directly to Congress.
Learn More

GASB

The Governmental Accounting Standards Board (GASB) is the independent organization that establishes and improves standards of accounting and financial reporting for U.S. state and local governments.
Learn More

Gain

A financial gain is the profit realized when the revenue received from a transaction exceeds the costs or when a security is sold for more than its purchase cost. The gain represents the difference between the sale price and the original cost.
Learn More

General Journal

A fundamental accounting record used to chronologically document all financial transactions of a business, allowing for the initial entry of transaction data.
Learn More

General Ledger

A comprehensive collection of a company's accounts that includes all assets, liabilities, equity, revenue, and expense transactions and balances.
Learn More

General Partnership

A business arrangement where two or more individuals, known as general partners, manage the business and are equally liable for its debts and obligations. There are no limited partners in a general partnership.
Learn More

Generally Accepted Accounting Principles (GAAP)

A set of conventions, rules, and procedures that define the accepted accounting practices in the United States at a particular time, established and updated by the Financial Accounting Standards Board (FASB).
Learn More

Generally Accepted Auditing Standards (GAAS)

Standards set by the American Institute of Certified Public Accountants (AICPA) that guide the auditor's professional qualities and judgment in the performance of audits and in the preparation of audit reports.
Learn More

Gift

A transfer of property from one individual to another without any expectation of payment or compensation, which may be subject to gift tax regulations.
Learn More

Going Concern

An accounting assumption that a business will continue to operate for the foreseeable future, without the need for liquidation or significant downsizing. This assumption implies that the entity has neither the intention nor the necessity to cease operations, curtail significantly the scale of its operations, or undertake a major reorganization.
Learn More

Going Private

The process by which a publicly traded company is transformed into a privately held entity. This occurs through the repurchase of shares by the company itself or acquisition by an outside private investor.
Learn More

Going Public

The process by which a privately held company offers its shares to the general public for the first time, typically through a stock exchange, involving registration with regulatory bodies such as the SEC.
Learn More

Goods Available for Sale

The total quantity of goods that a company has available for sale to customers in a given period, calculated as the sum of the beginning inventory plus the net cost of purchases made during that period.
Learn More

Goodwill

Goodwill is an intangible asset that represents the premium paid over the fair value of the net identifiable assets (tangible and intangible) and liabilities of an entity during its acquisition.
Learn More

Governing Documents

Official legal documents that outline the rules, responsibilities, and structures under which an entity operates. For a corporation, these include articles of incorporation and bylaws; for a partnership, the partnership agreement; for a trust, the trust agreement or trust indenture; and for an LLC, the articles of organization and operating agreement.
Learn More

Government Accountability Office (GAO)

The Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress, responsible for examining how taxpayer dollars are spent and providing Congress and federal agencies with objective, reliable information to help the government save money and work more efficiently.
Learn More

Governmental Accounting Standards Board (GASB)

The Governmental Accounting Standards Board (GASB) is the organization authorized to establish and improve standards of financial reporting for state and local government entities in the United States.
Learn More

Grantee

A person or entity to whom property, rights, or interests are legally transferred.
Learn More

Grantor

A grantor is an individual or entity that transfers property or creates a trust, and can also refer to a trader in the options market who earns premium income by selling options.
Learn More

Greenmail

A practice where a shareholder holds a large block of a company's stock and threatens a takeover, compelling the company to repurchase the stock at a premium to avoid the takeover.
Learn More

Gross Income

Gross income is the total income earned by an individual or a business from all sources before any deductions or taxes are applied.
Learn More

Gross Sales

The total amount of sales, both in cash and on credit, accumulated during a specific accounting period before any deductions are made.
Learn More

Guaranty

A legal commitment by one party to fulfill the obligations of a second party to a third party, should the second party fail to meet their obligations.
Learn More

1031 Question? Ask ARTE

Deferred's AI 1031 Research Assistant is trained on 8,000+ pages of US tax law and outperforms human CPAs by 22%+

CHAT NOW
Deferred.com Resources

Recent Posts

Can you 1031 exchange a vacation home?
Because the 1031 Exchange rules permit owners to use the property part of the year, exchangers can have a cash-flowing, appreciating investment that also serves as their semi-permanent vacation property.
Aaron LaRue
1031 Improvement Exchange
Learn how a 1031 Improvement Exchange can enable a value-add real estate investment strategy while also deferring capital gains taxes.
Aaron LaRue
1031 Exchange Examples
Review some common 1031 exchange examples and take advantage of our profit-generating ideas to use the 1031 Exchange to make your property portfolio more profitable.
Aaron LaRue
What are the disadvantages of a 1031 exchange?
The 1031 Exchange is a great way for businesses and investors to take advantage of the additional value of their real estate and put it into their next purchase, but are there tradeoffs to consider?
Aaron LaRue
What Happens to Depreciation in a 1031 Exchange?
Depreciation recapture is a process then enables the IRS to collect taxes on the financial gain you have made from the sale of an asset. Exactly what depreciation recapture rate will apply will depend on your individual circumstances.
Aaron LaRue
Form 6252: Report an Installment Sale
Use this form to report income from an installment sale on the installment method.
Aaron LaRue
Contact US
866-442-1031
(Call or Text)
support@deferred.com
Ask ARTE
About DeferredReviewsPricingCareers
Partner with Us$5m Fidelity BondEngineering Blog
ResourcesARTE: AI Tax AssistantDeferred Gains Calculator1031 Exchange Articles
Accounting Terms1031 Rules per StateFind a 1031 Intermediary
© 2024 Deferred Inc.
Terms PrivacyCommunications