Profit Margin Calculator

Formula

Profit margin = (Revenue-Cost) ÷ Revenue × 100

Worked example

With Revenue: 100 currency units, Cost: 60 currency units, profit margin is 40 %.

Calculation method

The rule is Profit margin = (Revenue-Cost) ÷ Revenue × 100.

Margin is profit divided by revenue. A product that costs 80 and sells for 100 has a 20% margin, not a 25% margin.

For this profit margin example, changing revenue from 100 currency units to 101 currency units while keeping the other inputs fixed changes profit margin from 40 % to 40.59 %.

Reading profit margin

Margin divides profit by selling price; markup divides profit by cost. They have different numerical values for the same transaction. In the worked values on this page, revenue 100 currency units, cost 60 currency units produce profit margin 40 %.

Practical use

Use these tools to set a price or compare product economics. The specific task here is to find profit margin from revenue, cost.

Limits and common mistakes

Specify which measure you mean before comparing targets. Additional operating costs may reduce actual net profit. Verify revenue in currency units before interpreting profit margin; a value measured on another basis would answer a different question.

Read the example and units

The worked values on this page use revenue 100 currency units and cost 60 currency units. With those exact entries, the calculator reports profit margin 40 %. The same example also reports profit 40.00 currency units; those figures describe different aspects of this one set of inputs rather than extra values to add to the primary answer. Keep all money amounts in one currency and check which amount is the base of a percentage. The displayed rule uses only the rate, amount, term, or count you supply; it does not import a market price, account balance, receipt rule, or contract term.

Compare one changed input

For a second scenario, change only revenue 100 currency units to revenue 110 currency units and leave the other example entries alone. The result for profit margin changes from 40 % to 45.45 %. Comparing one changed input at a time shows exactly which assumption drove the difference in this calculation. This comparison isolates the arithmetic effect of one assumption. Actual fees, contract terms, taxes, behavior, or market outcomes may change a real result, so compare several plausible inputs rather than relying on one precise-looking number.

How to interpret this kind of result

Margin and markup share the same gross difference between selling price and cost but use different denominators. Margin is a fraction of selling price; markup is a fraction of cost. A target margin therefore cannot be used as a markup percentage without conversion. Check the output name before comparing a quoted percentage with a business target. For this profit margin calculation, revenue in currency units and cost in currency units determine profit margin; the displayed profit margin 40 % belongs to that exact combination rather than to a different rate, term, or measurement basis.

Scope and practical checks

The entered cost and revenue define which expenses are counted. Freight, transaction charges, overhead, refunds, or tax may affect actual profit but are not added automatically. A margin on one item is not the same as net margin for a whole business. Use a consistent cost basis when comparing two products or periods. Check the revenue in currency units and cost in currency units entries against the quantities in your own situation before using profit margin; this page cannot infer a field or condition that you did not enter.

Common questions

What does this profit margin result include?

The profit margin comes from revenue in currency units and cost in currency units using the displayed rule Profit margin = (Revenue-Cost) ÷ Revenue × 100. It does not automatically include a condition absent from the listed inputs. Check the applicable account, transaction, or contract terms before using it for a financial decision.