Gross Profit Margin Calculator
A gross profit margin calculator helps businesses measure profitability by comparing revenue minus cost of goods sold (COGS) to total revenue. It reveals operational efficiency and pricing strategy effectiveness, enabling better financial decisions and performance benchmarking.
Calculator
Formula
Gross Profit Margin = [(Revenue - COGS) / Revenue] × 100
How to Use
Enter total revenue and cost of goods sold in USD. Click "Calculate" to get gross profit and margin percentage. Use "Clear" to reset fields. Results show profitability ratio and financial health assessment instantly.
Calculation Process
1. Subtract COGS from revenue to get gross profit
2. Divide gross profit by revenue
3. Multiply by 100 to get percentage
4. Analyze result: Higher % indicates better efficiency
FAQs
What is a good gross profit margin?
Industry standards vary, but generally 20-30% is average. Service industries often have higher margins (50-70%) while retail might have 20-30%. Compare with competitors for accurate assessment.
Can margin be over 100%?
No. Gross margin over 100% implies selling products for more than cost+production expenses, which is impossible in normal business operations. Check calculations if this occurs.
Difference between gross and net margin?
Gross margin considers only production costs, while net margin includes all operating expenses, taxes, and interest. Gross shows production efficiency, net reflects overall profitability.
How often should I calculate margin?
Monthly tracking is recommended for businesses. Frequent calculation helps identify trends, pricing issues, and cost control opportunities in real-time.
Does inventory affect gross margin?
Yes. Inventory valuation methods (FIFO/LIFO) impact COGS calculation. Higher inventory costs reduce gross margin if prices fluctuate significantly.