Profit Margin Calculator
Calculate gross and net profit margins
The Complete Guide to Profit Margin Calculation
Our Profit Margin Calculator helps you understand the financial health of your business by calculating both gross and net profit margins. Simply enter your revenue, cost of goods sold, and (optionally) operating expenses to get an instant analysis of your profitability.
What is Profit Margin?
Profit margin is a key financial metric that indicates the percentage of revenue retained as profit after accounting for expenses. There are two primary types:
- Gross Profit Margin: The ratio of gross profit (Revenue minus Cost of Goods Sold) to Revenue.
- Net Profit Margin: The ratio of net profit (Gross Profit minus Operating Expenses) to Revenue.
Gross Profit Margin = ((Revenue - Cost of Goods Sold) / Revenue) × 100%
How do we calculate profit margins?
Calculating profit margins is straightforward. Use these formulas:
Gross Profit Margin = ((Revenue - Cost of Goods Sold) / Revenue) × 100%
Net Profit Margin = ((Revenue - Cost of Goods Sold - Operating Expenses) / Revenue) × 100%
These formulas allow you to assess both your production efficiency and overall business profitability.
Profit Analysis: Gross vs. Net Profit
Analyzing both gross and net profit margins gives you a clear picture of your business’s financial performance. While a high gross profit margin indicates efficient production and pricing, the net profit margin reflects how well your business manages overall expenses.
A healthy profit margin is essential for sustainable growth and long-term success.
Profit Margin Calculator FAQs
What is profit margin?
Profit margin is the percentage of revenue that remains as profit after deducting all costs. It is a vital measure of a company's efficiency and profitability.
How is gross profit margin calculated?
Gross profit margin is calculated by subtracting the cost of goods sold from revenue, dividing the result by revenue, and then multiplying by 100 to get a percentage.
What does net profit margin indicate?
Net profit margin shows the percentage of revenue remaining after all operating expenses have been deducted from the gross profit, reflecting the overall profitability of the business.