Gross Margin

Operating profit (revenue minus cost of goods sold and operating expenses) expressed as a percentage of revenue. Operating margin measures how efficiently a company converts revenue into profit from its core business activities before interest and taxes.

Revenue minus variable costs, expressed as a total or per-unit figure. Contribution margin reveals how much each unit sold contributes to covering fixed costs and generating profit, and is a key input in unit economics analysis.

EBITDA expressed as a percentage of revenue, indicating how much operating profit a company generates from each pound of revenue before non-cash charges and financing costs. EBITDA margin is a key benchmark for operational efficiency across industries.

The measure of the value of goods and services produced, calculated as revenue minus the cost of purchased inputs (services, energy, and materials). GVA captures the value a company creates through its own activities and is a core productivity metric in the Opagio framework.

The percentage of recurring revenue retained from existing customers over a period, excluding any expansion revenue. GRR isolates the impact of churn and contraction and can never exceed 100%.

A measure of how effectively a company allocates capital to generate returns, calculated as net operating profit after tax divided by invested capital. ROIC above the cost of capital indicates value creation; below it signals value destruction.

The ratio of total purchased inputs (services, energy, and materials) to revenue, expressed as a percentage. Purchases intensity measures how dependent a business is on external inputs and how efficiently it converts purchased resources into value.

A measure of a company's financial performance that calculates the value created above the required return of investors, defined as net operating profit after tax minus the cost of capital employed. EVA highlights whether a firm's intangible and tangible assets are generating returns that exceed their cost of capital.

What is Gross Margin and Contribution Margin?

Gross Margin = (Revenue − Cost of Goods Sold) / Revenue. Contribution Margin = (Revenue − Variable Costs) / Revenue. Both measure profitability at different levels of cost allocation.