Profit Margin Calculator
Calculate gross profit, profit margin and markup from revenue and cost
Profit margin
How we calculated it
About the Profit Margin Calculator
Profit margin expresses profit as a percentage of revenue, making businesses or products of different sizes easier to compare. The most important question is which level of profit is being used in the numerator.
A gross margin, operating margin and net margin can all be correct while describing different layers of cost.
How to Use the Profit Margin Calculator
- Enter revenue for the period.
- Enter profit directly or enter the costs needed to derive the profit level you want to measure.
- Keep revenue and profit on the same reporting period and accounting basis.
- Calculate the margin and label it clearly as gross, operating or another margin where appropriate.
How the Calculation Works
Profit margin = profit ÷ revenue × 100 when revenue is positive.
If profit is not entered directly, it can first be calculated as revenue − included costs. The result then reflects only the cost categories represented in that profit figure.
Worked example
Profit Margin Calculator Worked Example
$250,000 revenue and $50,000 profit
Profit margin = $50,000 ÷ $250,000 × 100 = 20%. That means the modeled profit equals 20 cents for every dollar of revenue.
Result guide
Understanding Your Profit Margin Calculator Result
A higher margin generally means more profit remains from each revenue dollar, but meaningful comparison requires the same definition of profit.
Before you rely on the answer
Assumptions and Limitations
- Revenue and profit refer to the same period.
- Profit definition is consistent across comparisons.
- Taxes or overhead are included only if they belong to the chosen profit measure.
Practical tip
Using This Result in Practice
Do not compare one company’s gross margin with another company’s net margin. The formulas look similar, but the numerator represents very different costs.
Related calculations
Useful Calculations to Continue With
If you are setting a selling price from cost and need to distinguish markup from margin, use the Markup & Margin Calculator.
If the focus is profit after operating expenses, use the Operating Margin Calculator for that specific definition.
Common questions
Profit Margin Calculator FAQ
What is a 20% profit margin?
It means profit equals 20% of revenue under the profit definition used.
Is margin the same as markup?
No. Margin divides profit by selling price or revenue, while markup divides profit by cost.
Can profit margin exceed 100%?
Ordinary profit margin based on profit = revenue − costs does not exceed 100% when costs are non-negative, though unusual accounting definitions can complicate comparisons.