Gross margin is a metric analysts use to assess a company's financial health. It is also referred to as the gross profit margin. It represents the ratio of profit to a company after the deduction of direct costs of production and/or the costs of services, including depreciation and amortization from the revenues generated by sales during the period to Total Revenue.
Gross margin % = Gross income / Total revenue * 100
A hesitant gross margin sometimes indicates incompetent management. However, a strong change in gross margin may indicate that the company has changed its business strategy or business processes.