Free online tool that helps you calculate the profit margin of a product or service, which is the percentage of revenue that represents profit after all costs and expenses have been deducted.
Profit margin is a financial ratio that measures the profitability of a business or product by expressing the amount of profit as a percentage of revenue. In other words, it is the percentage of revenue that represents profit after all costs and expenses have been deducted.
There are several types of profit margin, including gross profit margin, operating profit margin, and net profit margin. Each type of profit margin focuses on a different level of costs and expenses.
Gross profit margin is the ratio of gross profit (revenue minus cost of goods sold) to revenue. This measures the profitability of a business's products or services before taking into account operating expenses and other costs.
Operating profit margin is the ratio of operating profit (revenue minus operating expenses) to revenue. This measures the profitability of a business's operations, taking into account all operating expenses, such as salaries, rent, and utilities.
Net profit margin is the ratio of net profit (revenue minus all expenses, including taxes and interest) to revenue. This measures the overall profitability of a business after all costs and expenses have been deducted.
Profit margin is an important metric for businesses because it shows how efficiently they are generating profits from their sales. A high profit margin indicates that a business is generating more profit for each dollar of revenue, while a low profit margin indicates that a business is struggling to generate profits.