Profit Margin
Calculator
Results
- Net profit margin (%)
- 12.5
- Net income
- 62,500
- Total costs as % of revenue
- 87.5
Results
| Net profit margin (%) | 12.5 |
| Net income | 62,500 |
| Total costs as % of revenue | 87.5 |
formula-map diagram
- Net profit margin (%)
- 12.5
- Net income
- 62,500
- Total costs as % of revenue
- 87.5
Formula breakdown
Formula
Net profit margin % = Net income ÷ Revenue × 100= 12.5
Note
This is a simplified model. Results use standard textbook definitions and ignore taxes, seasonality, attribution lag, discounting and accounting policy differences. Use them as an estimate, not as accounting, tax or investment advice.
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See all →Frequently asked questions
What is profit margin and what does it measure?+
Profit margin measures what percentage of revenue turns into profit after all relevant costs are subtracted: profit margin % = (net profit / revenue) x 100. It's a key indicator of how efficiently a business converts sales into actual earnings.
What's the difference between gross, operating, and net profit margin?+
Gross margin only subtracts cost of goods sold; operating margin also subtracts operating expenses like salaries and rent but not interest or taxes; net margin subtracts everything, including interest, taxes, and one-time items, giving the truest bottom-line profitability picture.
Why can a company have high revenue but low profit margin?+
High revenue with low margin usually means costs — whether cost of goods, operating expenses, debt interest, or taxes — are consuming most of each sales dollar, which is common in high-volume, low-margin industries like grocery retail or commodity manufacturing.
Is a higher profit margin always better?+
Generally yes for profitability, but an unusually high margin compared to industry peers can also indicate underinvestment in growth, marketing, or R&D, while a low margin isn't automatically bad if it reflects a deliberate high-volume strategy. Margin should always be interpreted alongside revenue growth and industry context.
How do I improve profit margin without raising prices?+
The main levers are reducing cost of goods sold (better supplier terms, more efficient production), cutting operating expenses, or improving sales mix toward higher-margin products — all of which increase the profit retained from the same revenue.