Profit Margin Calculator
Turn a company’s revenue and costs into gross, operating, and net profit margins.
Gross profit $200,000
Operating profit $80,000
Net profit $50,000
Net profit $50,000 on $500,000 of revenue.
A profit margin is profit as a share of revenue: margin = profit ÷ revenue × 100. On $500,000 of revenue with $300,000 COGS, $120,000 operating expenses, and $30,000 interest and tax, gross profit is $200,000 (40%), operating profit $80,000 (16%), and net profit $50,000 (10%).
What a profit margin measures
A profit margin tells you how many cents of every revenue dollar a business keeps as profit. It is a company-level view of a whole period’s profit and loss, not a per-item price decision. This calculator works down the income statement: it subtracts each layer of cost from revenue to give three margins — gross, operating, and net — so you can see where the money goes between the top line and the bottom line.
Do not confuse this with a per-item markup vs. margin calculation. That tool turns a single product’s cost into a selling price (markup is profit over cost; margin is profit over price). Here, every margin is measured against total revenue, and the inputs are the whole business’s sales and costs.
Gross profit = revenue − COGS; operating profit subtracts operating expenses; net profit also subtracts interest, tax, and other costs
Worked example
A business books $500,000 in revenue with $300,000 COGS, $120,000 in operating expenses, and $30,000 of interest and tax.
- 1 Find gross profit. Revenue − COGS = $500,000 − $300,000 = $200,000.
- 2 Divide by revenue for gross margin. $200,000 ÷ $500,000 × 100 = 40%.
- 3 Subtract operating expenses for operating profit. $200,000 − $120,000 = $80,000, which is $80,000 ÷ $500,000 × 100 = 16% operating margin.
- 4 Subtract other costs for net profit. $80,000 − $30,000 of interest and tax = $50,000.
- 5 Divide net profit by revenue for net margin. $50,000 ÷ $500,000 × 100 = 10% — the bottom-line margin.
Gross vs. operating vs. net margin
Each margin is that level’s profit divided by the same revenue. Moving down the list subtracts one more layer of cost.
| Margin | Profit = revenue minus… | What it tells you |
|---|---|---|
| Gross margin | COGS (direct cost of goods sold) | How profitable the core product is before running the business |
| Operating margin | COGS + operating expenses | Profit from operations before interest and tax |
| Net margin | COGS + operating expenses + interest, tax, other | The true bottom line — what the business actually keeps |
Reading the results
Typical margins vary widely by industry. Software and other low-cost-of-goods businesses often post gross margins above 70% and net margins in the double digits, while grocers and other high-volume retailers may run net margins of just 1%–3%. Compare a margin to peers in the same industry, not to a single universal benchmark.
Margins can be negative. If costs exceed revenue at any level, that margin is negative — a loss. A healthy gross margin with a negative net margin usually means operating expenses or interest and tax are eating the profit.
Margin is not markup. A product bought for $60 and sold for $100 carries a 40% margin ($40 ÷ $100) but a 67% markup ($40 ÷ $60). Margin is always the smaller number because it divides by the larger figure — the price, or here, revenue.