What is profit margin?

Profit margin is a financial metric that measures the percentage of revenue that remains as profit after deducting costs. It indicates how efficiently a business converts sales into actual profit. A higher margin means more of each dollar in revenue is kept as profit rather than spent on expenses.

There are two common ways to express profitability: margin and markup. Margin is calculated as a percentage of the selling price (revenue), while markup is calculated as a percentage of the cost. Understanding both is essential for pricing strategies and financial analysis.

Tool description

A comprehensive margin calculator that helps you compute profit margin, markup percentage, and related financial metrics. The tool supports multiple calculation modes: calculate margin from cost and revenue, determine cost from margin and revenue, calculate revenue from markup and cost, or find the required revenue from cost and desired margin.

Features

  • Multiple calculation modes: Calculate margin from cost/revenue, or reverse-calculate cost and revenue from percentages
  • Margin and markup: Shows both margin percentage and markup percentage for any calculation
  • Real-time results: Instant calculations as you type values
  • Profit display: Shows the absolute profit amount alongside percentages
  • Input validation: Prevents invalid calculations with clear error messages

Examples

  • Cost: $70, Revenue: $100 → Margin: 30%, Markup: 42.86%, Profit: $30
  • Cost: $50, Markup: 100% → Revenue: $100, Margin: 50%, Profit: $50
  • Revenue: $200, Margin: 25% → Cost: $150, Markup: 33.33%, Profit: $50

Use cases

  • Product pricing: Determine the selling price needed to achieve a target profit margin
  • Financial analysis: Analyze profitability across products or services
  • Business planning: Calculate revenue targets based on cost structure and desired margins