Profit Margin Calculator
Calculate gross profit, profit margin percentage, and cost share from sales revenue and cost. Clearly distinguish margin from markup with step-by-step business formulas.
Commercial Financials
0ms Local Engine₹30,000
42.86%
- Gross Profit/Loss: Revenue (₹1,00,000) - Cost (₹70,000) = ₹30,000
- Profit Margin: (30000 ÷ 100000) × 100 = 30%
- Cost Share of Revenue: (70000 ÷ 100000) × 100 = 70%
- Equivalent Markup on Cost: (30000 ÷ 70000) × 100 = 42.86%
Understanding Commercial Profit Margin
Learn how to measure gross margin, optimize product unit economics, and avoid confusing margin with markup.
1. What is Gross Profit Margin?
Gross Profit Margin is a key financial ratio measuring the percentage of revenue remaining after subtracting direct costs (Cost of Goods Sold / COGS). It indicates how efficiently a business converts top-line sales into gross earnings to cover operating expenses and net profits.
2. Core Formulas
Gross Profit = Revenue - Cost
Profit Margin % = (Gross Profit ÷ Revenue) × 100
Where Revenue > 0.
3. Margin vs. Markup: The Crucial Difference
The most frequent mistake in business pricing is mixing up Margin and Markup. Although both use the same rupee profit, their denominators are completely different:
| Metric | Formula | Denominator | Example (Cost ₹70, Sell ₹100) |
|---|---|---|---|
| Profit Margin | (Profit ÷ Revenue) × 100 | Selling Price (₹100) | 30.00% |
| Markup | (Profit ÷ Cost) × 100 | Cost (₹70) | 42.86% |
Want to compute selling prices directly from wholesale unit costs? Use our dedicated Markup Calculator.
- Cost Exceeding Revenue: If selling price is ₹70 while cost is ₹80, the business experiences a net loss of ₹10, resulting in a negative margin (-14.29%).
- Ignoring Indirect Overhead: Gross profit margin only reflects direct production costs. Rent, marketing, salaries, and interest must be covered by this margin before net profit is realized.
Frequently Asked Questions on Profit Margins
Everything you need to know about calculating profit margins, cost ratios, and pricing strategy.
What is the formula for Gross Profit Margin?
How does Profit Margin differ from Markup?
What is a good profit margin for small businesses in India?
Can profit margin ever reach or exceed 100%?
What does a negative profit margin indicate?
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