What does Gross Margin represent?

Gross Margin represents the difference between total sales revenue and the cost of goods sold (COGS). This measure indicates how much money remains after accounting for the costs directly tied to producing the goods that were sold. By effectively calculating gross margin, businesses can understand their profitability on core operations before considering other expenses such as operating costs, administrative fees, or taxes.

Option B correctly identifies this relationship. Gross margin is crucial for evaluating a company's financial health, as it reflects the efficiency of production and pricing strategies. A higher gross margin suggests a more efficient operation, allowing the company to cover additional expenses and potentially lead to greater profits. Understanding gross margin is essential for loss prevention professionals as it helps assess product pricing strategies and inventory management.