Gross Margin Ratio, What It Is and Why It Matters

When I evaluate a company, one of the measures I consider is its gross margin ratio. I like to see a gross margin that is consistent over time. I also reflect on the story this ratio is telling.

As I’ve mentioned in previous articles, I’m a numbers person. Gross margin is definitely a numbers thing. But this ratio may also reveal clues about executive priorities, business stability, and competitive advantages.

Let’s cover the basics and then consider what the gross margin ratio may be telling me.