financial-metrics
Gross margin is gross profit divided by revenue: the share of sales left after direct costs of delivering the product or service, before operating overhead, depreciation policy debates, interest and tax.
Gross profit is revenue minus the costs that vary with delivery: materials, direct labour, freight-in, hosting and third-party usage for a software product, subcontractors on a job. IAS 2 guides inventory costing for goods businesses; service businesses still need a consistent “cost of sales” policy even when IFRS does not force a gross-profit subtotal.
Gross margin = (Revenue − Cost of sales) / Revenue
Classification is the whole game. Move customer-success salaries from opex into cost of sales and margin falls without the economics changing. The opposite restatement is a classic teaser trick.
Illustration only. Hypothetical component manufacturer.
| Year 1 | Year 2 | |
|---|---|---|
| Revenue | €18.0m | €20.5m |
| Cost of sales | €11.3m | €13.4m |
| Gross profit | €6.7m | €7.1m |
| Gross margin | 37.2% | 34.6% |
| EBITDA margin | 14.0% | 14.2% |
EBITDA margin held up because OPEX was cut. Gross margin compressed — usually a mix, pricing or input-cost story that commercial due diligence should own before anyone capitalises the EBITDA.
Price/volume/mix bridges; make-vs-buy; whether a revenue multiple is even sane (low gross margin businesses rarely deserve software-like sales multiples).
Gross margin ignores capacity costs sitting in opex, warranty tails, and returns. It is not ROIC. Inventory accounting (FIFO vs weighted average) moves the ratio in inflationary periods.
Dazur locks a cost-of-sales map (what sits above the gross-profit line) so EBITDA add-backs cannot quietly reclassify the same cost twice.