ETEvoraTools
Business Calculators

Profit Margin Calculator

Profit Margin Calculator subtracts cost from revenue and divides the difference by revenue. The result answers what share of each revenue unit remains as profit under the entered cost definition. It is not interchangeable with markup, which divides by cost, and it is only comparable across periods when revenue and cost are recognized consistently.

Runs locally — files stay on your device
Quick answer

What is the profit margin on 100 revenue and 60 cost?

Profit is 40 and profit margin is 40%.

Formula: (100 − 60) ÷ 100 × 100 = 40%

Margin uses revenue as its denominator

Profit margin = (revenue − cost) ÷ revenue × 100. The word “profit” must be qualified: using direct product cost gives a gross-style margin, while including operating or all expenses produces different measures.

How it works

Enter revenue and the cost scope you want to compare for the same period, currency, and business activity. Label the resulting margin with that scope rather than presenting it as a universal profitability number.

Key concepts

Margin and markup have different denominators

Margin divides profit by revenue; markup divides profit by cost.

Cost scope changes the meaning

Gross, contribution, operating, and net margins subtract different expenses.

When to use it

  • Check profit share using a clearly defined cost basis.
  • Compare consistently prepared periods or products.
  • Distinguish margin from markup.

When not to use it

  • Do not mix gross revenue with costs from another scope.
  • Do not compare businesses using different accounting definitions.
  • Do not use margin alone to judge cash flow or business health.

Worked examples

Basic margin

Input
Revenue 100; cost 60
Expected output
40%

Forty of each hundred in revenue remains under this cost definition.

Loss-making sale

Input
Revenue 80; cost 100
Expected output
−25%

The negative margin is measured against revenue.

Same profit, different denominator

Input
Revenue 150; cost 100
Expected output
33.33% margin and 50% markup

This shows why the terms cannot be swapped.

Common mistakes

Reporting markup as margin

Dividing by cost produces a larger percentage. Correction: Use revenue as denominator for margin.

Combining incompatible periods

The numerator no longer represents one activity period. Correction: Align revenue and cost timing.

Calling gross margin net margin

Operating and other expenses are omitted. Correction: Name the cost scope explicitly.

Best practices

  • Define revenue and cost consistently.
  • State whether the metric is gross, contribution, operating, or net style.
  • Reconcile management calculations with formal accounts.

Related operations and differences

Gross Profit Calculator

Choose Gross Profit Calculator when you need to calculate gross profit and gross margin.; use Profit Margin Calculator specifically for profit margin.

Markup Calculator

Choose Markup Calculator when you need to calculate markup from cost and selling price.; use Profit Margin Calculator specifically for profit margin.

Revenue Growth Calculator

Choose Revenue Growth Calculator when you need to measure growth between two revenue periods.; use Profit Margin Calculator specifically for profit margin.

Burn Rate Calculator

Choose Burn Rate Calculator when you need to estimate average monthly cash burn.; use Profit Margin Calculator specifically for profit margin.

Business Runway Calculator

Choose Business Runway Calculator when you need to estimate how many months current cash can cover.; use Profit Margin Calculator specifically for profit margin.

Customer Churn Calculator

Choose Customer Churn Calculator when you need to calculate the percentage of customers lost.; use Profit Margin Calculator specifically for profit margin.

Limitations and privacy

  • The result is a simplified management estimate, not accounting, tax, legal, or investment advice.
  • Revenue recognition, taxes, returns, overhead allocation, and accounting standards are not modeled.
  • Revenue cannot be zero in the percentage formula.

Business figures are calculated locally in this browser and are not uploaded.

Frequently asked questions

What is the profit-margin formula?

(Revenue − cost) ÷ revenue × 100.

Is margin the same as markup?

No. Markup divides profit by cost.

Can profit margin be negative?

Yes, when entered cost exceeds revenue.

Which costs should I enter?

Use the cost scope that matches the named margin you intend to measure.