The gross profit margin is similar to the net profit margin but instead of deducting all costs from revenue, we deduct only the cost of goods sold (also known as the cost of sales). This answers the question that asks how much gross profit are we generating from each dollar in sales. By gross profit, we mean profit before operating expenses. When we sell an item, first we need to be able to pay for that item, then we need to cover our “overhead” and administrative expenses and finally have some money left over as profit.

Here is the formula:

For more information, The Main KPI Types has a list of some KPIs and their types.