Profit Margin Calculator
Calculate gross profit, profit margin percentage, and markup from revenue and product cost.
Sales & Cost Inputs
Required *Notice: Currency selection changes how amounts are displayed; it does not convert exchange rates.
Calculation Summary
Direct financial earnings retained after fulfilling cost of goods sold.
How to Use This Calculator
- Enter Gross Revenue: Input the total selling price or invoiced sales amount for your product or batch.
- Enter Cost of Goods Sold (COGS): Input direct production, acquisition, or fulfillment costs.
- Select Currency: Switch between USD, INR, EUR, GBP, CAD, or AUD to match your regional operating unit.
- Review Live Results: Review gross profit, gross margin percentage, equivalent markup percentage, and cost ratio immediately.
Formulas & Mathematical Foundation
Gross Profit = Revenue − CostThe dollar amount retained after direct goods costs.
Margin = (Gross Profit ÷ Revenue) × 100The percentage of each revenue dollar that is profit.
Markup = (Gross Profit ÷ Cost) × 100The percentage added above cost to establish price.
Cost Ratio = (Cost ÷ Revenue) × 100The proportion of revenue consumed by product costs.
Step-by-Step Worked Example
Scenario: Selling an inventory batch with $10,000 Revenue and $6,000 Cost
- 1. Gross Profit = $10,000 − $6,000 = $4,000
- 2. Profit Margin = $4,000 ÷ $10,000 = 0.40 = 40.00%
- 3. Markup = $4,000 ÷ $6,000 = 0.6667 = 66.67%
- 4. Cost Ratio = $6,000 ÷ $10,000 = 0.60 = 60.00%
Frequently Asked Questions
What is the formula for calculating profit margin?▼
Profit Margin (%) is calculated as: Gross Profit divided by Total Revenue, multiplied by 100. Where Gross Profit = Revenue - Cost of Goods Sold.
What is the difference between profit margin and markup?▼
Profit margin expresses gross profit as a percentage of selling price (revenue), whereas markup expresses gross profit as a percentage of product cost. For example, if cost is $60 and selling price is $100, profit margin is 40% ($40 / $100), but markup is 66.67% ($40 / $60).
Can profit margin be negative?▼
Yes. When the cost of goods sold exceeds gross revenue, gross profit is negative, resulting in a negative profit margin that indicates an operating loss on direct sales.
What happens to markup when cost is zero?▼
When cost is $0, markup is mathematically undefined because division by zero is not permissible. In this scenario, profit margin is 100% and markup is presented as not applicable (N/A).
What is a good profit margin for a small business?▼
Standard profit margins vary significantly by industry. Professional services and software often target 40% to 80% gross margins, while physical retail and grocery typically operate on 15% to 30% gross margins.
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