Profit margin is a percentage that measures how much of each dollar of revenue a company retains as profit. There are three main types: gross margin (production efficiency), operating margin (operational efficiency), and net margin (overall profitability).
Gross Margin = (Revenue − COGS) / Revenue × 100
Operating Margin = Operating Income / Revenue × 100
Net Margin = Net Income / Revenue × 100
COGS = Cost of Goods Sold (direct production costs). Operating Income = Gross Profit minus operating expenses. Net Income = final profit after all expenses, interest, and taxes.
Example 1: Company: Revenue $500K, COGS $300K, Operating Expenses $100K, Taxes & Interest $30K
Result: Gross: 40% | Operating: 20% | Net: 14%
Use our free Profit Margin Calculator to skip the manual math.
Open Profit Margin Calculator