The gross profit margin calculator provides assistance for calculating profit margin. The total revenue that a company earns includes the cost involved in producing the goods (Cost of Goods Sold). These two parameters are also used in calculation of profit margin.
In simple terms, margin is the difference between the revenue a company has earned and the cost of goods sold. This difference is expressed as a percentage of revenue. When the value of margin is determined, it is taken as a ratio of revenue and the results is multiplied by 100.
The formula for profit margin is given as
(Revenue – Cost of Goods Sold) / Revenue * 100 (The profit margin is expressed in percentage).
For better understanding, we need to use the gross profit margin formula written above through an example.
Consider that there is a firm which has earned a revenue of $100. The cost spent on producing the goods is $60. On the basis of these details, the profit margin has to be determined. Hence, we need to insert these values in the formula mentioned above.
Profit Margin = (Revenue – Cost of Goods Sold) / Revenue * 100
Profit Margin = (100-60)100*100
Profit Margin = 40%
The formula for calculating gross margin is very similar to profit margin.
Gross Margin = Profit / Revenue * 100
Consider that a financial firm earns a profit of $20 and the total revenue generated is $150. It means that the cost of producing goods is $ 130 ($150 - $20). Now, simply insert these values in the formula written above.
Gross Margin = 20/150 * 100
Gross Margin = 13.33%
This calculator helps with accurate margin calculation.
This calculator can be used effectively by companies to project profit amounts. For instance, if a company needs to achieve 25% profit margin, it can use this calculator and check the profit volumes. However, if companies want to calculate their sales tax and GST, they can effectively use GST calculator and Sales Tax calculator to avoid any inconvenience.