### Definition: What is Gross Margin Ratio?

**Gross Margin Ratio** is the profitability ratio which compares the gross margin of the business to the net sales. GM ratio shows that a business is how profitable sale its inventory or merchandise.

With the profit margin ratio, this ratio is confused but both the ratios are totally different from each other.

Gross margin ratio only considers the (COGS) cost of goods sold because it measures the profitability of the selling inventory. Whereas the profit margin ratio used to measure the other expenses.

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