1. What is Profit Margin %?

Profit Margin % is a financial metric that shows what percentage of revenue has turned into profit. It's a key indicator of a company's financial health and pricing strategy.

2. How Does the Calculator Work?

The calculator uses the profit margin formula:

Where:

• \( Profit \) — Net income after all expenses (USD)
• \( Revenue \) — Total sales or income (USD)

Explanation: The formula calculates what portion of each dollar earned is actual profit after accounting for all costs.

3. Importance of Profit Margin

Details: Profit margin helps businesses assess pricing strategies, control costs, and compare performance against industry benchmarks. It's crucial for investors evaluating company profitability.

4. Using the Calculator

Tips: Enter profit and revenue in USD. Both values must be positive numbers, and revenue cannot be zero. The calculator will compute the profit margin percentage.

5. Frequently Asked Questions (FAQ)

Q1: What's a good profit margin?
A: This varies by industry. Generally, 10% is average, 20% is good, and 5% is low. Service businesses often have higher margins than retailers.

Q2: What's the difference between gross and net profit margin?
A: Gross margin considers only cost of goods sold, while net margin includes all expenses (taxes, salaries, etc.).

Q3: Can profit margin be over 100%?
A: Yes, if costs are negative (e.g., selling an asset for more than its book value), but this is unusual for normal operations.

Q4: How often should I calculate profit margin?
A: Businesses should track it monthly at minimum. More frequent tracking helps identify trends quickly.

Q5: Does higher revenue mean higher profit margin?
A: Not necessarily. If costs increase proportionally with revenue, margin stays the same. Efficiency improvements increase margin.