Multiple Cholce Question Why is it important for a business's success to have a high gross margin?

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1. A **high gross margin** means that a business retains a larger portion of revenue after paying for its cost of goods sold (COGS). This can be represented as:  
   $$
   \text{Gross Margin} = \frac{\text{Revenue} - \text{COGS}}{\text{Revenue}}
   $$

2. A higher gross margin indicates that less revenue is consumed by the production costs, leaving more funds available to cover fixed costs, operating expenses, and investments in growth.

3. With a high gross margin, a business has greater **pricing power**, meaning it can maintain profits even if costs increase or if it faces competitive pressure.

4. It allows a company to reinvest profits into areas such as research and development, marketing, and capital expenditures, fueling further success and innovation.

5. A high gross margin also provides a cushion to absorb fluctuations in sales or costs, contributing to overall financial stability and resilience in economic downturns.

6. Overall, maintaining a high gross margin is essential for long-term sustainability and competitive advantage, enabling the business to generate profits and support strategic investments for future growth.
A high gross margin helps a business keep more of its revenue after paying for production costs. This allows the company to cover other expenses, maintain pricing flexibility, reinvest in growth, and stay financially stable, all of which are important for long-term success.

Multiple Cholce Question Why is it important for a business's success to have a high gross margin?

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