What is profit margin?
Profit margin shows how much profit remains from each dollar of revenue after the costs you enter are deducted. It helps compare pricing and cost decisions on a consistent percentage basis.
Profit margin formula
Profit margin = (Revenue − Cost) ÷ Revenue × 100. Revenue is the income from sales; cost is the expense included in producing or delivering those sales.
Example
With $10,000 in revenue and $7,500 in cost, profit is $2,500. $2,500 ÷ $10,000 × 100 = 25.00%.
Common mistakes
- Confusing revenue with profit.
- Comparing different reporting periods.
- Leaving out refunds, discounts, or relevant direct costs.
Frequently asked questions
- What is profit margin?
- Profit margin is the share of revenue that remains after the cost entered in the calculator is deducted.
- Is profit margin the same as markup?
- No. Margin divides profit by revenue, while markup divides profit by cost.
- Can profit margin be negative?
- Yes. If cost is higher than revenue, the calculation shows a negative margin and a loss.
- What costs should I include?
- Include the costs you want the result to represent, and use the same reporting period as the revenue figure.
- Why is markup unavailable when cost is zero?
- Markup divides by cost, so it cannot be calculated when the entered cost is zero.
- Are my inputs saved?
- No. This calculator runs locally in your browser and does not upload your values.