Gross income divided by net sales, expressed as a percentage. Gross margins reveal how much a company earns, taking into consideration the costs that it incurs for producing its products and services. Gross margin is a good indication of how profitable a company is at the most fundamental level. A company with a gross margin of 35 percent is more profitable than a company with a gross margin of 20 percent, at least when analyzing that particular measure of profitability. Companies with higher gross margins have more money to spend on other business operations or to pay dividends.