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This is a question about financial terms and definitions in English.

Gross Margin = Revenue - COGS

Gross Profit Margin = (Revenue - COGS) / COGS

In the first equation we also mean Profit (Gross Profit Margin = Revenue - COGS), don't we? Why does adding a word Profit (in Gross Profit Margin) turns a sum of money Revenue - COGS into a ratio (Revenue - COGS) / COGS?

Gross Profit Margin Definition

Gross Margin Definition

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  • Good question. Where did you see those two terms together? – RonJohn Jan 23 at 15:21
  • @RonJohn These are just definitions. Maybe they are not generally accepted. I don't know whether they are used together or not. – Daniel Jan 23 at 15:27
  • We can't rationally comment on terms that you might have just pulled randomly out of the air. Show us where you got the terms. – RonJohn Jan 23 at 15:35
  • @RonJohn I added links – Daniel Jan 23 at 17:52
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    Daniel, you didn't copy the ratio correctly from the provided link. It's (Net Sales-COGS)/Net Sales – Orange Coast- reinstate Monica Jan 27 at 7:23
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Finance (and other professions I'm sure) often uses terms and phrases interchangeably and inconsistently, so it's not a function of the english language, but a function of these terms being used by fallable humans. "Gross profit" and "Gross margin" can be synonymous, and some use "gross margin" to mean the ratio. So it's not always clear exactly what these mean.

If you are confused by a term or phrase being used inconsistently, look at the context to see what it's referring to. For example, if an article says "Gizmo's gross margin was 22%", then obviously it's talking about a ratio.

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