Xero Metric
Accounting
Gross Profit Margin = (Revenue − COGS) / Revenue
Gross profit margin is the percentage of revenue left after subtracting the cost of goods sold. It shows how efficiently your business produces and delivers what it sells.
Full guide: definition, formula, and benchmarksXeroAccountingGross Profit Margin
Gross profit margin is the percentage of revenue left after subtracting the cost of goods sold. It shows how efficiently your business produces and delivers what it sells.
How to calculate gross profit margin
Why gross profit margin matters for Xero users
Gross profit margin is the ceiling for every downstream profitability metric. A compressing margin signals rising input costs, pricing pressure, or a shift in product mix towards lower-margin lines, any of which will eventually squeeze operating profit and cash flow.
For Xero users, tracking gross margin by tracking category or product line reveals exactly which parts of the business are earning their keep and which are dragging the overall number down.
Understand and act on gross profit margin with KPI Tree
Query the Xero MCP profit and loss report or sync Xero revenue and cost of goods sold accounts into your warehouse and let KPI Tree calculate gross profit margin from the mapped accounts. Decompose the metric into revenue and COGS drivers, then further into product lines or tracking categories.
Assign ownership to your commercial lead and set alerts when margin deviates from its statistical baseline for two consecutive periods.
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Related Xero metrics
Total Revenue
AccountingMetric Definition
Total revenue is the sum of all income recognised across every income account over a period. It is the top line of the profit and loss statement and the foundation metric every other financial KPI depends on.
Operating Cash Flow
AccountingMetric Definition
Operating cash flow measures the cash generated (or consumed) by the core trading activity of the business over a period. Unlike profit, it is not distorted by accruals, non-cash items, or timing of invoices.
Expense-to-Revenue Ratio
AccountingMetric Definition
Expense-to-Revenue Ratio = Operating Expenses / Total Revenue
Expense-to-revenue ratio measures total operating expenses as a percentage of total revenue over the same period. It is a single-number summary of how operationally efficient the business is at each level of revenue.
Net Profit Margin
AccountingMetric Definition
Net Profit Margin = Net Profit / Total Revenue
Net profit margin is the percentage of revenue that remains as profit after every operating expense, interest charge, and tax has been deducted. It is the cleanest single-number measure of overall business profitability.
Explore gross profit margin across integrations
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