Business math, made visible
Profit margin calculator
Profit margin calculator
Express a known profit figure as a share of revenue.
Inputs stay in this browser. Results use your entries and the formula below.
Enter revenue and the profit figure you want to measure. This profit margin calculator divides that profit by revenue and expresses the result as a percentage. Use gross profit to measure gross margin, or net profit from your accounts to measure net margin. The tool does not determine which expenses belong in your profit figure. Its starting example uses the gross profit in an IRS training example, so that initial result is gross margin rather than net margin.
Worked example
| Source item | Published value |
|---|---|
| Selling price | $1.60 |
| Purchase cost | $1.20 |
| Gross profit | 40 cents |
| Gross profit margin | 25 percent |
These are the IRS gross-profit example figures. Enter $1.60 as revenue and $0.40 as profit. The result is 25% gross margin. The source does not supply a net profit for this example. Source: IRS: gross profit ratio and markup examples.
How it works
Profit margin (%) = profit for the period / revenue for the same period * 100
Formula basis: IRS: gross profit ratio and markup examples. Ratios are converted to percentages for display. Intermediate values retain full calculation precision; displayed amounts are rounded.
Choose the profit figure deliberately
Profit margin is meaningful only when the numerator has a clear definition. Gross profit uses sales less cost of goods sold. A net profit figure includes further expenses according to your accounting records. The FDIC training guide distinguishes gross profit and profit after overhead, while the EPA source describes after-tax profit relative to annual sales. Label your result with the exact profit measure you entered.
Match profit and revenue to the same scope
Both inputs should cover the same business, product group, and period. Do not compare a full-year profit with a single month of revenue. Use the same currency and the same scale for both values. If your statement reports amounts in thousands, enter both values in thousands or convert both to ordinary dollars. The ratio is unchanged when the scale is consistent.
Read negative profit without hiding the loss
The profit field accepts negative values so a loss can be expressed as a negative margin. Revenue must be positive because it is the denominator. A zero profit produces a zero margin, while a zero revenue cannot produce a defined ratio. This calculation alone does not establish whether a business has a strong margin. It supplies arithmetic, with no industry benchmark or recommended target.
Use the formula in a spreadsheet
Put revenue in A1 and profit in B1, then use =B1/A1 and format as a percentage. If you instead start with revenue and cost of goods sold, the gross margin page calculates the profit numerator for you.
Frequently asked questions
What is the profit margin formula?
Divide the chosen profit amount by revenue for the same period. Multiply by 100 to express the result as a percentage number.
Is profit margin the same as markup?
No. Margin divides profit by revenue or selling price. Markup on cost divides the price-minus-cost difference by cost.
How do I calculate margin in Excel?
Use =B1/A1 with profit in B1 and revenue in A1. Apply percentage formatting to the result.
Can I use this for net profit margin?
Yes. Enter your net profit as the profit input. Include the appropriate expenses and tax treatment in that figure before entering it.
Can margin be negative?
Yes. A negative profit divided by positive revenue produces a negative margin. This tool preserves that sign.
Does the example show a good margin?
The example demonstrates the IRS calculation. It is not an industry standard, a pricing recommendation, or a target for your business.
Sources
- IRS: gross profit ratio and markup examples
- EPA: after-tax profit divided by annual sales, page 5-2
- FDIC: Financial Management, pages 20 and 21
Data as of 2026-10-05. Examples are historical teaching examples, not current prices or market benchmarks. Calculated results are derived from entered values.
Return to the business calculator hub to choose another measure.