Gross margin is a financial metric that shows the difference between revenue and the cost of goods sold (COGS). It is expressed as a percentage of revenue and indicates how efficiently a company produces and sells its products. A higher gross margin means a company retains more money from each sale to cover other expenses and generate profit. To calculate gross margin, subtract COGS from total revenue and then divide that number by total revenue. The formula is: Gross Margin = (Revenue - COGS) / Revenue. This metric is crucial for businesses to assess their profitability and make informed pricing and production decisions.