Complete guide: Business Profitability
Updated:
Gross profit = revenue net of returns − direct cost of sales. The after-cost result also deducts operating expenses, payment fees and entered other costs. Revenue 10,000 and total costs 7,500 yield 2,500 and a 25% margin.
Margin divides profit by revenue; return on costs divides the result by total costs. It is not ROI on invested capital or an annualized return. With no costs that ratio is undefined. Losses can be shown; profitability is not assumed.
Use amounts from the same period and currency without exchange conversion. Separate customer-collected taxes from revenue when applicable and do not also include a fee under another expense. Initial business amounts are examples, not your company's data.
How it works
- 1Enter revenue and costs for the same period.
- 2Separate sales costs, operations and fees.
- 3Compare gross profit, result and margins.
Frequently asked questions
Is this net profit after taxes?
Only entered costs are deducted. Profit tax, interest and depreciation are not calculated automatically; include them where appropriate without duplicating.
Does the link preserve my inputs?
Yes. Amounts, currency and options are included in the shared link to reproduce the calculation. Recipients can see those inputs.