Sales minus the cost of sales, before deducting administrative and selling expenses. Gross profit margin is expressed as a percentage of sales.

Example:

•   Retail Store: If a shop sells goods worth £100,000 and the cost of goods sold is £60,000, the gross profit is £40,000, giving a gross profit margin of 40%.

•   Manufacturer: A company sells machinery worth £2 million, with direct production costs of £1.2 million. The gross profit is £800,000, and the gross profit margin is 40%.

Real-Life Scenario:

A software company sells subscriptions worth £500,000 annually, with direct costs of £150,000 for development and server maintenance. Its gross profit is £350,000, giving a gross profit margin of 70%.

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