Fundamentals & corporate actions
What is the difference between Gross Margin, Operating Margin, and Net Margin?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Gross margin is revenue minus cost of goods sold as a percentage of revenue; operating margin further subtracts operating expenses; net margin subtracts all expenses, interest, and taxes from revenue.
How it works
Comparing all three margins reveals where profitability is gained or lost—strong gross margin but weak net margin can indicate high overhead, debt costs, or tax burdens eroding bottom-line profit.
An example
A company with 60% gross margin but only 5% net margin likely has high operating costs or interest expenses consuming most of its gross profit.
Risk & limitations
Margin trends matter more than a single snapshot; declining margins over several quarters can signal weakening competitive position or rising costs.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.