Gross Profit Margin represents the percentage of revenue that exceeds the cost of goods sold (COGS). It is calculated by taking the gross profit, which is the revenue minus the COGS, and dividing it by the revenue, then multiplying by 100 to get a percentage. For example, if a company has $100,000 in revenue and the COGS is $60,000, the gross profit margin is [(100,000 - 60,000) / 100,000] x 100 = 40%. A healthy gross profit margin indicates that a company is efficient in managing its production costs relative to its sales revenue. This metric is valuable in assessing a company's profitability and is often used in conjunction with other financial metrics to analyze operational performance. For example, an improvement in the gross profit margin could indicate better cost control or higher pricing power, while a decline might require management to investigate cost efficiency or pricing strategies to remain competitive. The Gross Profit Margin is especially crucial in industries with high variable costs, as it provides a measure of how effectively a company is utilizing its resources to generate profit.