The gross profit margin calculator provides assistance for calculating profit margin.
The gross profit margin calculator provides assistance for calculating profit margin. The total revenue that a company earns includes the cost involved in producing the goods (Cost of Goods Sold). These two parameters are also used in calculation of profit margin.
Understanding Profit Margin
In simple terms, margin is the difference between the revenue a company has earned and the cost of goods sold. This difference is expressed as a percentage of revenue. When the value of margin is determined, it is taken as a ratio of revenue and the results is multiplied by 100.
- Profit Margin is used for various financial purposes including checking the financial state of a company. When one company plans to purchase a firm or take managerial control, it checks the profit margin. If the value of margin is negative, it means that the company is facing losses and a zero profit margin gives the impression that there are no profits or losses. However, a positive margin value shows that a company is on a profitable route.
- Companies monitor the profit margin in various financial paradigms. Some firms check the margin for each investment while the others perform this check annually.
Earnings per share and percentage calculators are also widely used among companies to calculate share and percentages respectively.
Formula for Profit Margin
The formula for profit margin is given as
(Revenue – Cost of Goods Sold) / Revenue * 100 (The profit margin is expressed in percentage).
For better understanding, we need to use the gross profit margin formula written above through an example.
How to calculate Profit Margin?
Consider that there is a firm which has earned a revenue of $100. The cost spent on producing the goods is $60. On the basis of these details, the profit margin has to be determined. Hence, we need to insert these values in the formula mentioned above.
Profit Margin = (Revenue – Cost of Goods Sold) / Revenue * 100
Profit Margin = (100-60)100*100
Profit Margin = 40%
Understanding the Gross Margin Formula
The formula for calculating gross margin is very similar to profit margin.
Gross Margin = Profit / Revenue * 100
Consider that a financial firm earns a profit of $20 and the total revenue generated is $150. It means that the cost of producing goods is $ 130 ($150 - $20). Now, simply insert these values in the formula written above.
Gross Margin = 20/150 * 100
Gross Margin = 13.33%
Prepostseo margin calculator is Accurate
This calculator helps with accurate margin calculation.
- If gross profit has to be calculated, it needs to be selected from the drop down menu. After that, the cost and revenue figures need to be entered.
- The tool would incorporate the input values and then determine the results. The outputs include margin percentage, profit amount and markup percentage. For instance, if the cost is 1500 and revenue is 2000, margin percentage would be 25, profit will be 500 and markup would be 33.33%.
This calculator can be used effectively by companies to project profit amounts. For instance, if a company needs to achieve 25% profit margin, it can use this calculator and check the profit volumes. However, if companies want to calculate their sales tax and GST, they can effectively use GST calculator and Sales Tax calculator to avoid any inconvenience.