Profit Margin Calculator
Calculate gross profit, net profit margin, markup percentage, and revenue needed for a target margin.
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How to use this calculator
Profit Margin % expresses profit as a percentage of revenue. Markup % expresses profit as a percentage of cost.
- 1
Enter the revenue (total selling price or income).
- 2
Enter the cost (cost of goods sold or total expenses).
- 3
The calculator shows your profit margin %, gross profit, and markup %.
Frequently asked questions
What formula does this tool use for profit margin?
This tool uses gross profit = revenue − cost, profit margin = gross profit ÷ revenue × 100, markup = gross profit ÷ cost × 100, and cost ratio = cost ÷ revenue × 100. With the defaults of 1,000 revenue and 600 cost, profit is 400.00, margin 40.00%, markup 66.67% and cost ratio 60.00%.
Is the headline percentage margin or markup?
The highlighted figure is margin, measured against revenue. Markup, measured against cost, is shown as a separate line. A revenue of 70 against a cost of 40 gives 42.86% margin and 75.00% markup from the same 30.00 of profit, so make sure you quote the one that matches the convention you are using.
What counts as cost in this tool?
Whatever you type in the cost box; there is only one. The label suggests cost of goods sold, which would make the result a gross margin. Operating expenses, interest, tax and owner pay are not deducted unless you add them to the cost, in which case the figure becomes a broader margin.
What if revenue is zero?
Margin and cost ratio cannot be calculated without a revenue figure, so they show n/a. The gross profit line still shows revenue − cost, so revenue 0 against cost 50 reports −50.00, and markup is −100.00% because that is measured on cost.
What if cost is zero?
Margin is 100.00% and the cost ratio is 0.00%, because all of the revenue is profit. Markup would need a division by zero, so that line shows n/a rather than a large number or an error.
Can the margin be negative?
Yes. When the cost is above revenue, profit and margin are both negative. A revenue of 250 against a cost of 300 gives −50.00 of profit, a −20.00% margin, a −16.67% markup and a 120.00% cost ratio. Nothing is capped or hidden.
How is this different from a net or operating margin?
Those subtract more categories of cost. This tool subtracts one number from revenue. If you want an operating margin, add the operating expenses to the cost box first, and remember that the Markup line then measures profit against the combined cost, not against goods sold alone.
Profit margin, markup and cost ratio from two numbers
One profit, three ways of expressing it
Revenue and cost give a single profit figure. The tool then states it as a share of revenue (margin), as a share of cost (markup), and shows the cost as a share of revenue as well. The three lines always agree with each other: margin plus cost ratio is 100%, and markup is just margin divided by the cost ratio. Choosing the right one depends on which convention your market or your accountant uses.
Worked examples, including a loss
With 1,000 of revenue and 600 of cost, profit is 400.00, margin 40.00% and markup 66.67%. Revenue 70 against cost 40 gives 30.00 profit, 42.86% margin and 75.00% markup. Selling at 250 against a cost of 300 gives −50.00 of profit, a −20.00% margin and a −16.67% markup, with the cost ratio at 120.00%. All three were run through the calculator.
Holding revenue at 1,000 while cost moves
In the table the revenue is fixed, so only the cost changes. Every 200 taken off the cost adds 200 to profit and 20 points to the margin, but the markup climbs faster each time because it is measured on a shrinking base. The last row is the limiting case, where a zero cost makes markup impossible to compute.
| Cost | Gross profit | Profit margin | Markup | Cost ratio |
|---|---|---|---|---|
| 800 | 200.00 | 20.00% | 25.00% | 80.00% |
| 600 | 400.00 | 40.00% | 66.67% | 60.00% |
| 400 | 600.00 | 60.00% | 150.00% | 40.00% |
| 0 | 1,000.00 | 100.00% | n/a | 0.00% |
Checking a quoted margin
A quoted margin should reproduce the profit when applied to revenue. If someone says a product earns “40%” and the revenue is 1,000, profit should be 400; if the profit is 400 on a 600 cost, the 40% is a margin and 66.67% would be the markup. Entering the two prices here shows immediately which description fits the numbers.
Limits of a two-input margin
The calculation has no time dimension, no tax and no allowance for returns or discounts, and it takes one cost total only. Zero revenue produces n/a for margin and cost ratio. A margin that looks healthy here can still be a loss once overheads are counted, so choose what goes into the cost box deliberately. Using the same definition of cost each time is what makes margins from different products or months comparable.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →