Gross margin is a company's net sales revenue minus its cost of goods sold (COGS). The gross margin represents the amount of sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells. The higher the amount, the more the company retains on each dollar of sales to service its other costs and debt obligations. A firm's net sales is gross revenue less returns, allowances, and discounts. The gross margin may also be calculated in percentage terms by dividing the gross margin number by net sales revenue. The gross margin number represents the portion of each dollar of revenue that the company retains as gross profit.
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