### Definition: What is the Gross Profit Margin Ratio?

**Gross Profit Margin ratio** is the profitability ratio that calculates the percentage of sales that exceed the cost of goods sold.

In other words, we can say that Profit Margin Ratio measures the efficiency of the company that how a company uses its labour and materials to produce and sell products profitably.

Investors and management use this ratio to find the profitability of core business activities without considering the indirect costs.

Simple to say that investors use this to find the efficiency of the company to produce and sell its products.

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