Profit Margin Calculator
Use your own numbers after reviewing the formula and worked example.
Quick answer
Profit margin expresses profit as a percentage of revenue.
Formula or method
Keep units, percentages and time periods consistent. The formula is useful as a transparent check on the calculator result and helps explain why changing one input changes the answer.
Step-by-step
- Choose the profit level being measured.
- Subtract matching expenses from revenue.
- Divide profit by revenue.
- Convert to percent.
Worked example
If revenue is $100,000 and expenses are $82,000, profit is $18,000 and margin is 18%.
How to interpret the result
Gross, operating and net margin use different expense definitions, so compare like with like.
When the answer is used for a purchase, loan, payroll decision, construction order, school grade, health estimate or other real-world choice, verify the assumptions that matter in that context. Accurate arithmetic still depends on accurate inputs.
Common mistakes
- Mixing profit definitions.
- Dividing by expenses instead of revenue.
- Comparing differently defined margins.
Frequently asked questions
Profit vs margin?
Profit is a dollar amount; margin is a percentage of revenue.
Can margin be negative?
Yes.
Is higher margin always better?
Not by itself; volume and business model matter too.