Margin is the difference between revenue and the associated cost of sales. There are several variations on the concept, which are:
- Gross margin. This is revenues minus both the fixed and variable components of the cost of goods sold.
- Contribution margin. This is revenues minus all variable expenses.
- Operating margin. This is revenues minus the cost of goods sold and all operating expenses.
- Profit margin. This is revenues minus all expenses, including financing and non-recurring expenses.
These margins are closely followed, since even a small decline in any of them can be a precursor to ongoing losses.