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Frequently Asked Questions(FAQ)

What does a 20% Gross Profit Margin mean?

Gross Profit Margin indicates the percentage of revenue that a business retains as gross profit. For example, the GPM of 20% means that for every dollar of revenue earned, $0.20 is retained, and $0.80 is spent on the Cost of Goods Sold. 

What does a 40% Gross Profit Margin mean?

Gross Profit Margin measures the portion of each dollar retained by a business. This means that a GPM of 40% indicates that for every dollar of revenue collected, $0.40 is retained and $0.60 is spent on the Cost of Goods Sold.

Is 30% a high profit margin?

Generally, 30% is considered a high profit margin. While the definition of a good profit margin can vary from industry to industry, a good rule of thumb is: 5% is a low margin, 10% is a healthy margin, and 20% is a high margin.

About the Authors

Tetiana Sitiugina-Babiuk

Written by: Tetiana Sitiugina-Babiuk

Financial Sector Specialist and Content Strategist

Independent writer, content strategist, and financial sector specialist. Tatiana has an extensive experience in working with financial institutions such as Bank of Canada and Risk Management unit at FinDev Canada. She holds an MA in Financial Risk Management from the University of Toronto.

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