Project Gross Margin is a financial term mostly applied to business and investment projects to identify the amount of gross income expressed as a percentage ratio between profits generated by a project and costs required by this project. It is a financial indicator that reveals how much the project earns taking into account the costs that are incurred for producing project product.
Project gross margin is one of the financial measures that help evaluate profitability of a project. It is calculated as a percentage ratio between the project’s gross income and its expenses. Obviously, a project with higher gross margin is more profitable because it generates more profits and incurs fewer costs.
Gross margin shows cost-effectiveness a project. In other words, a project with lower gross margin is likely to be less effective in terms of costs incurred and thus less profitable. Cost-effectiveness analysis is often used to research and evaluate project profitability.
A company that operates profitable projects with higher gross margins will gain more money for spending on other projects and business operations, such as market research, business development and employee training. Such a company has more chances to prevail at the marketplace and reach higher competitiveness.