Key performance question this indicator helps to answer
How much profit are we generating for each dollar in sales?
Another profitability ratio which is widely used is the gross profit margin. Instead of the net profit margin, where we are deducting all costs from the revenue, here we are only deducting the cost of goods sold (sometimes referred to as cost of sales). Costs of goods are the direct production and distribution costs a company incurs for supplies, inventory, production and distribution of their products or services.
Looking at how much it costs a company to produce its goods and services and putting this in relation to sales ...