Gross profit margin is a financial metric that shows the percentage of revenue that exceeds the cost of goods sold (COGS). It is calculated by subtracting COGS from total revenue and then dividing that number by total revenue. This figure helps businesses understand how efficiently they are producing and selling their products. A higher gross profit margin indicates that a company retains more money from each sale after covering production costs. This metric is crucial for assessing profitability and can guide decisions related to pricing, cost control, and overall business strategy. Companies often compare their gross profit margins to industry averages to gauge performance.