Profit margin is an important business metric because it shows how much of your revenue remains as profit.
Profit Margin Formula
A basic profit margin calculation is:
Profit Margin = (Profit ÷ Revenue) × 100
Suppose a business generates $20,000 in revenue and has $15,000 in relevant costs, leaving $5,000 in profit.
Calculate:
(5,000 ÷ 20,000) × 100 = 25%
The profit margin is 25%.
Another Example
If a product sells for $100 and produces $30 of profit:
(30 ÷ 100) × 100 = 30%
Its profit margin is 30%.
You can use the Percentage Calculator when you need to calculate a percentage from two values.
Why Profit Margin Matters
Profit margin can help businesses evaluate pricing, costs, and profitability. However, there are different types of margins, including gross, operating, and net profit margin, so the appropriate profit figure depends on what you are analyzing