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Gross Margin (GM%)

Gross margin is gross profit expressed as a percentage of revenue. Formula: Gross Margin = Gross Profit ÷ Revenue × 100

Why It Matters

•Provides a normalized view of profitability across SKUs with different price points.
•Commonly used benchmark for evaluating product profitability.
•Misleading if used alone, because it ignores cycle time and capital requirements.

Connection to Capital

High gross margin does not guarantee strong financial performance if capital remains tied up for too long.

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