Gross Margin
Percentage of revenue remaining after cost of goods sold.
Definition
Gross margin measures the percentage of revenue that exceeds the direct cost of producing goods or services. For non-bank financial companies—like payment processors or insurance companies—gross margin indicates pricing power and production efficiency.
Formula
Gross Margin = (Revenue - Cost of Revenue) / Revenue × 100
Why It Matters
High gross margins give companies more room to invest in growth, pay dividends, or absorb cost increases. Fintech companies like Visa and Mastercard have gross margins above 75%, reflecting their asset-light business models.