How To Calculate Gross Margin in Excel or Sheets
Introduction
Gross margin is a key metric for businesses of all sizes. It shows how much money is left over after accounting for the cost of goods sold (COGS). A high gross margin means that a business is efficient at converting sales into profit. In this blog post, we will show you how to calculate gross margin in Excel or Sheets.
Why it's important
Gross margin is important for several reasons. First, it can be used to track the profitability of a business over time. Second, it can be used to compare the profitability of different products or services. Third, it can be used to make pricing decisions.
How to calculate gross margin in Excel or Sheets
There are two ways to calculate gross margin in Excel or Sheets:
- Method 1: Using the formula
The formula for calculating gross margin is:
(Revenue - COGS) / Revenue
To use this formula, simply enter your revenue and COGS figures into two separate cells. Then, in a third cell, enter the formula above. For example, if your revenue is $100 and your COGS is $70, your gross margin would be 30%.
- Method 2: Using a pre-built function
Excel and Sheets both have pre-built functions that can be used to calculate gross margin. The function in Excel is called GROSSMARGIN, and the function in Sheets is called GROSSMARGIN. To use these functions, simply enter your revenue and COGS figures into the function's arguments.
Summary
Calculating gross margin is a simple process that can be done in Excel or Sheets using a formula or a pre-built function. Gross margin is an important metric that can be used to track the profitability of a business, compare the profitability of different products or services, and make pricing decisions.
