Gross Profit Margin

Online Calculators for Business & Investment

Gross Profit Margin

The Gross Profit Margin (also known as Gross Profit Percentage or Gross Margin) is a very important calculation, particularly in retail or manufacturing entities. Specifically, it is a measure of sales revenue less cost of sales; that is, the profit between the cost producing or purchasing an item of inventory and its eventual sales price. It is measured as a percentage and this tells us what percentage of every dollar of sales revenue remains after the cost of purchasing or manufacturing the inventory.

Note: Within service firms, the cost of sales are generally not inventory costs, but instead could be the salary of the staff member providing the service to the customer.

It is an important indicator for both investors and business managers because it tells us how much funds are left from sales revenue to pay all our remaining expenses while also having a net profit left over. If a business cannot generate a large enough gross profit from its sales, then there is pressure on the bottom line when financial reports are generated, and ultimately the viability of the business.

If you have a Gross Profit Margin of, say, 35%, then this means that 35% of your sales revenue is left to pay your remaining expenses and leave for net profit. In other words, 65% of your final sales price was consumed by the costs of manufacturing or purchasing the inventory.

Gross Profit Margin Calculator

The calculator asks for:
Sales Revenue, which is in the Income Statement.
Cost of Sales (COGS), which is also found in the Income Statement.

Sales Revenue ($):

Cost of Sales [COGS] ($):

Gross Profit Margin (%):

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