Since your gross margin is over 40% (.40), which is above average for distribution companies, your company should have enough profit to cover selling expenses, overhead, interest, and profit to the owners. If however, other operating expenses such as selling costs or officer compensation are very high, your gross margins may not be enough to support these other costs.
On the average, gross margins in distribution companies are typically between 15% and 30% (.15-.30). The gross margin depends both on the prices you can charge and on your product costs.
Who's Watching:
See the Definition for a discussion of other parties that are interested in your company's gross margin.
Actions:
Review your production expenses to make sure that your high gross margin does not represent the absence of depreciation due to obsolete equipment; one-time sales of older, less expensive inventory; or similar unusual events.
