Profit margin shows how much of each revenue dollar remains after the costs included in the calculation. The result is only meaningful when the cost definition is clear.
Find profit first
Subtract cost from revenue. If revenue is $500 and cost is $325, profit is $175.
Divide profit by revenue
Divide $175 by $500 to get 0.35, then multiply by 100. The profit margin is 35%.
Interpret negative margins
If cost exceeds revenue, profit and margin are negative. Revenue of $400 and cost of $460 produces a loss of $60 and a margin of −15%.
Avoid comparing unlike margins
Gross margin, operating margin, and net margin include different costs. Compare businesses or periods only when the underlying definitions are consistent.
A calculator is often the quickest way to check your mental math. The important part is using the right starting value.
Open a calculator →Common questions
What is the profit margin formula?
(Revenue − cost) ÷ revenue × 100.
What happens when revenue is zero?
A conventional margin cannot be calculated because division by zero is undefined.
Does this replace accounting advice?
No. It is a general calculation; accounting treatment depends on context and applicable rules.
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