Profit Margin Calculator

Gross and net margin from cost price and selling price.

Overview

Computes gross profit, operating margin, and net profit percentage from product cost of goods sold and net sales revenue.

Formula & Calculation Method

Gross Margin (%) = ((Revenue - COGS) / Revenue) × 100 | Net Margin (%) = (Net Profit / Revenue) × 100

Gross margin reflects production efficiency; net margin reflects overall business profitability after all overhead and taxes.

Worked Example: Product Cost ₹60 Sold for ₹100 with ₹15 Operating Overhead

Inputs: Revenue = ₹100 | Cost of Goods Sold = ₹60 | Operating Expenses = ₹15

  • Gross Profit = ₹100 - ₹60 = ₹40; Gross Profit Margin = (40 / 100) × 100 = 40.0%
  • Operating Profit = ₹40 - ₹15 = ₹25; Net Profit Margin = (25 / 100) × 100 = 25.0%

Summary: Revenue = ₹100 | Gross Margin = 40.0% | Net Profit Margin = 25.0%

Common Use Cases

  • Product Line Auditing: Identify which inventory SKUs generate the highest net percentage profit margins.
  • E-Commerce Pricing: Ensure marketplace selling prices account for platform commissions, payment gateway fees, and returns.
  • Competitor Benchmarking: Compare operational profitability against publicly listed industry peer averages.

Frequently Asked Questions

What is a good profit margin?

Average margins vary: retail grocery operates on 2-5%, manufacturing on 10-15%, and SaaS software on 20-30%+ net margins.

What is the difference between markup and margin?

Margin is profit divided by revenue; markup is profit divided by cost price.

How do discounting strategies impact profit margins?

A 20% discount on a product with a 30% margin slashes total dollar profit by two-thirds.

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