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Profit margin calculator

What the goods sold cost to buy or make.

Rent, wages, marketing and the rest. Needed for net profit.

Gross profit margin

37.5%

Gross profit
£90,000
Net profit
£24,000
Net profit margin
10%

Working

  1. Gross profit = sales revenue − cost of sales = £240,000 − £150,000 = £90,000.
  2. Gross profit margin = gross profit ÷ sales revenue × 100 = £90,000 ÷ £240,000 × 100 = 37.5%.
  3. Net profit = gross profit − other operating expenses £60,000 and interest £6,000 = £90,000 − £66,000 = £24,000.
  4. Net profit margin = net profit ÷ sales revenue × 100 = £24,000 ÷ £240,000 × 100 = 10%.

Your result

37.5%. Each £1 of sales leaves 37.5p after the cost of the goods sold, and 10p once every other cost is paid.

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Gross profit margin is gross profit ÷ sales revenue × 100: £90,000 of gross profit on £240,000 of sales is a 37.5% margin.

Questions people ask

What is the gross profit margin formula?

Gross profit margin = gross profit ÷ sales revenue × 100, where gross profit = sales revenue − cost of sales. £90,000 of gross profit on £240,000 of sales is a margin of 37.5%.

What is the net profit margin formula?

Net profit margin = net profit ÷ sales revenue × 100. Net profit is gross profit minus other operating expenses and interest: £90,000 − £60,000 − £6,000 = £24,000, a 10% margin on £240,000 of sales.

Why is the net profit margin lower than the gross profit margin?

Net profit takes off every other cost the business pays, such as rent, wages and interest, as well as the cost of sales. It can only equal the gross margin if those other costs are zero.

What is a good profit margin?

It depends on the industry. A supermarket sells large volumes on thin margins, while a software firm keeps most of each sale. Judge a margin against the same business's past years and against similar businesses.

Keep going

How we work this out

What it does

Enter sales revenue and costs to get gross profit, net profit and both profit margins, with every line of working.

Gross profit, net profit and the two profitability ratios in GCSE Business (Edexcel 1BS0 Appendix 3; AQA 8132 3.6.4).

Method

  1. Gross profit = sales revenue − cost of sales.
  2. Gross profit margin = gross profit ÷ sales revenue × 100.
  3. Net profit = gross profit − other operating expenses and interest.
  4. Net profit margin = net profit ÷ sales revenue × 100.