Profit Margin Calculator: business profitability

This calculator determines the profit margin of a product or service, showing what percentage of the selling price becomes profit after covering costs.

Profit margin formula

Profit margin is computed as:

Margin % = (Revenue − Cost) / Revenue × 100

The absolute profit is simply Revenue − Cost. A positive margin indicates profitability; a negative one indicates a loss.

Example 1: product with good margin

Problem: Product sold at $150 with cost of $90.

1. Profit:
   • $150 − $90 = $60.
2. Margin:
   • ($60 / $150) × 100 = 40%.

Answer: Profit of $60, margin of 40%.

Example 2: low margin

Problem: Product sold at $80 with cost of $72.

1. Profit:
   • $80 − $72 = $8.
2. Margin:
   • ($8 / $80) × 100 = 10%.

Answer: Profit of $8, margin of 10%.

Usos comuns

• Evaluating profitability of individual products in a business.
• Comparing margins across different product lines.
• Setting selling prices based on costs and desired margin.
• Analyzing the operational efficiency of a company.
• Making decisions about which products to promote or eliminate.
• Presenting financial results to investors or partners.

Common mistakes in margin calculations

• Confusing profit margin with markup.
• Not including all costs (shipping, storage, marketing).
• Computing margin on cost instead of selling price.
• Ignoring fixed costs when evaluating real profitability.

Dica profissional

Markup and margin are different: if you buy at $100 and sell at $150, the markup is 50% but the margin is 33.3%. Always use margin for financial analysis because it reflects the true proportion of price that is profit.