Gross Profit Calculator
Enter revenue and cost of goods sold to get gross profit, gross profit margin and profit percentage on cost, for one sale, one order or a whole year.
Use totals for a period (a month, a year, one order) or the figures for a single unit.
Gross profit
9,000
Gross profit margin
36%
Profit % on cost (markup)
56.25%
Cost of sales ratio
64%
Gross profit = revenue − cost of goods sold. Margin = gross profit ÷ revenue × 100
How to calculate gross profit
Gross profit is what is left from sales after you pay for the goods you sold. Subtract the cost of goods sold (COGS) from revenue: gross profit = revenue − COGS. Gross profit margin is that profit as a percentage of revenue.
Gross profit formula: gross profit = revenue − cost of goods sold
Gross margin formula: gross margin % = gross profit ÷ revenue × 100
Profit percentage on cost: profit % = gross profit ÷ cost of goods sold × 100
Worked example
A trading company sells goods for 25,000 in a month. Those goods cost 16,000 to buy and bring in. Gross profit is 25,000 − 16,000 = 9,000. Gross margin is 9,000 ÷ 25,000 × 100 = 36%. Profit percentage on cost is 9,000 ÷ 16,000 × 100 = 56.25%. The cost of sales ratio is 16,000 ÷ 25,000 = 64%, which with the 36% margin adds up to 100%.
What goes into cost of goods sold?
Cost of goods sold covers only the costs of the goods you actually sold in the period, not everything you spent. For a trading business it usually includes:
- the purchase price of the goods, net of supplier discounts
- inbound freight and insurance to your warehouse
- customs duty and import taxes you cannot reclaim
- customs clearance, port and handling charges on the goods
- packaging that becomes part of the product
Rent, salaries of office staff, marketing and bank charges are operating expenses. They come off later, between gross profit and net profit. For a period, COGS = opening stock + purchases (with the costs above) − closing stock.
Gross margin vs profit percentage: which one to use?
Both describe the same profit, divided by different numbers. Gross margin divides by revenue; profit percentage on cost divides by cost, which makes it the same number as a markup. Accounts and financial reports use gross margin. Many traders, and school and exam questions in India and Pakistan, use "profit percentage" to mean profit on cost price. Always say which one you mean.
| Revenue | Cost of goods sold | Gross profit | Gross margin | Profit % on cost |
|---|---|---|---|---|
| 1,000 | 900 | 100 | 10% | 11.11% |
| 1,000 | 800 | 200 | 20% | 25% |
| 1,000 | 700 | 300 | 30% | 42.86% |
| 1,000 | 600 | 400 | 40% | 66.67% |
| 1,000 | 500 | 500 | 50% | 100% |
Gross profit vs net profit
Gross profit shows whether your buying and pricing work; net profit shows whether the whole business works. Net profit = gross profit − operating expenses − interest − tax. A healthy gross margin with a poor net result usually points to overheads; a weak gross margin points to pricing, supplier costs or freight.
How to raise your gross margin
- Buy on better terms. Compare Incoterms as well as prices: an FOB quote and a CIF quote are not comparable until you add the freight and insurance yourself.
- Ship fuller containers. Freight per unit falls as volume rises; check your loads with the CBM calculator.
- Review prices line by line. Use the markup calculator to set prices from the margin you need.
- Watch the product mix. Selling more of your higher margin lines lifts the overall margin with no price change.
Features
- Gross profit, gross margin % and profit % on cost at once
- Cost of sales ratio for comparing periods
- Works for a single unit, an order or a full year
- Flags a gross loss when costs exceed revenue
- Formula shown with the result
Frequently asked questions
How do you calculate gross profit?
Subtract the cost of goods sold from revenue. If you sold goods for 25,000 that cost you 16,000, your gross profit is 9,000.
What is the gross margin formula?
Gross margin % = (revenue − cost of goods sold) ÷ revenue × 100. With revenue of 25,000 and COGS of 16,000, the gross margin is 36%.
How do I calculate profit percentage?
Profit percentage on cost = profit ÷ cost × 100. If you buy at 80 and sell at 100, the profit percentage is 20 ÷ 80 × 100 = 25%. Profit as a share of the selling price (margin) would be 20%.
What is a good gross profit margin?
It depends on the industry. Wholesale and distribution often run on lower gross margins than retail or branded goods. Compare your margin with your own past periods and with businesses that sell similar goods.
Is shipping part of cost of goods sold?
Inbound freight, insurance and duty on goods you buy for resale are normally part of their cost. Delivery costs to your customers are usually treated as selling expenses. Follow the accounting rules that apply to your business.
What is the difference between gross profit and net profit?
Gross profit is revenue minus the cost of the goods sold. Net profit also subtracts operating expenses such as rent, salaries and marketing, plus interest and tax.