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
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
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%.
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:
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.
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 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.
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.
Gross margin % = (revenue − cost of goods sold) ÷ revenue × 100. With revenue of 25,000 and COGS of 16,000, the gross margin is 36%.
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%.
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.
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.
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.