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Finance formula

How to calculate profit margin

Profit margin shows how much of each sales dollar remains as profit.

See the formulaOpen calculator
Direct answer
Formula
Profit margin = profit / revenue * 100

Use the table below to match each symbol with the right input. Keep units consistent before you start.

Profit margin formula
Start here when you only need the equation and variable names.
Formula
Profit margin = profit / revenue * 100

Profit margin shows how much of each sales dollar remains as profit.

Variable meanings
Check each symbol, meaning, and unit before you calculate.
SymbolNameDescriptionUnit
profitProfitRevenue left after the chosen cost layer.currency
revenueRevenueSales before subtracting costs.currency
When to use this formula
Check that your situation matches the formula before you trust the result.
  • Run it when you are checking pricing, cost control, or profitability across products or periods.
Step-by-step method
Follow these steps when you are solving it by hand.
  1. 1Choose gross profit, operating profit, or net profit.
  2. 2Divide that profit by revenue.
  3. 3Multiply by 100.
  4. 4Use the same profit level when comparing two margins.
Examples
These sample numbers show the order of operations and units.
Net margin
profit
$18,000
revenue
$120,000
  1. 1.Profit margin = 18000 / 120000 * 100
  2. 2.Profit margin = 0.15 * 100
  3. 3.Profit margin = 15%
Result
The net profit margin is 15%.
Gross margin
revenue
$80,000
COGS
$52,000
  1. 1.Gross profit = 80000 - 52000 = 28000
  2. 2.Gross margin = 28000 / 80000 * 100
  3. 3.Gross margin = 35%
Result
The gross margin is 35%.
Mistakes to avoid
Small input or unit errors can change the answer a lot.
  • Using an annual rate where the profit margin formula needs a monthly or period rate.
  • Entering 8 instead of 0.08 when the formula calls for a decimal rate.
  • Comparing results across different time periods without converting them first.
  • Rounding each step instead of rounding the final answer.
Open the Profit Margin Calculator
Open the calculator for the answer without rewriting the formula.

Enter your values in the related calculator, then compare the output with the hand method above.

Open Profit Margin Calculator
FAQs
Short answers for common formula questions.
Can I calculate Profit margin by hand?

Yes. Write the units next to each value, convert rates or measurements first, and round only the final answer.

Why does my Profit margin result differ from another calculator?

Most differences come from rounding, unit conversions, rate timing, or a slightly different version of the formula.

When is the Profit Margin Calculator better than hand math?

Open the Profit Margin Calculator to check several scenarios or skip the hand arithmetic.