Gross Profit Margin Calculator
Calculate your business profitability quickly and accurately
Gross Profit
$0.00
Gross Margin (%)
0.00%
Please enter valid positive numbers. Revenue must be greater than zero.
Understanding Gross Profit Margin
Gross profit margin is a critical financial metric that represents the percentage of revenue that exceeds the cost of goods sold (COGS). It measures how efficiently a company produces and sells its products.
The Gross Margin Formula
Gross Profit Margin = [(Revenue – COGS) / Revenue] x 100
Key Components
- Revenue: The total amount of money generated by sales before any expenses are deducted.
- Cost of Goods Sold (COGS): The direct costs attributable to the production of the goods sold in a company. This includes material costs and direct labor.
- Gross Profit: The absolute dollar amount remaining after subtracting COGS from Revenue.
Practical Example
Imagine you run a retail store selling sneakers. You sell a pair of shoes for $150 (Revenue). You purchased those shoes from the wholesaler for $90 (COGS).
- Gross Profit: $150 – $90 = $60
- Gross Margin: ($60 / $150) x 100 = 40%
This means that for every dollar of revenue, you keep $0.40 to cover operating expenses, taxes, and net profit.