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Profit Margin Calculator

Calculate profit margin, markup, stock trading margin, and forex margin. Three calculators for business and trading.

Margin Worksheet
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Understanding Profit Margin

Profit margin shows what percentage of each dollar in revenue is actual profit. It's one of the most important metrics for evaluating business performance and comparing companies within an industry.

Margin vs Markup

These are frequently confused. Both measure profit, but from different bases:

  • Margin: Profit ÷ Selling Price — what percentage of the price is profit
  • Markup: Profit ÷ Cost — how much you add above cost

Example

An item costs $120 and sells for $160:

  • Profit: $40
  • Margin: $40 ÷ $160 = 25%
  • Markup: $40 ÷ $120 = 33.33%

Margin-to-Markup Conversion

  • 20% margin = 25% markup
  • 25% margin = 33.3% markup
  • 33% margin = 50% markup
  • 50% margin = 100% markup

Types of Profit Margin

  • Gross margin: (Revenue − Cost of Goods Sold) ÷ Revenue. Measures production efficiency
  • Operating margin: (Revenue − COGS − Operating Expenses) ÷ Revenue. Includes rent, salaries, marketing
  • Net margin: (Revenue − All Expenses − Taxes) ÷ Revenue. The bottom line — what you actually keep

Stock Trading Margin

When buying stocks on margin, your broker lends you part of the purchase price. The margin requirement is the percentage you must fund with your own capital.

  • Initial margin: Minimum equity required to open a position (typically 50% per Reg T)
  • Maintenance margin: Minimum equity to keep the position open (typically 25-30%)
  • Margin call: When your equity drops below maintenance margin, you must deposit more funds or the broker sells your position

Example: 100 shares at $18.30 with 30% margin = $549 required, with $1,281 borrowed from the broker.

Currency Exchange (Forex) Margin

Forex trading uses leverage ratios instead of percentage requirements. The margin is the deposit needed to control a larger position.

  • 20:1 leverage: Control $20,000 with $1,000 margin (5% requirement)
  • 50:1 leverage: Control $50,000 with $1,000 margin (2% requirement)
  • 100:1 leverage: Control $100,000 with $1,000 margin (1% requirement)

Formula: Margin Required = (Exchange Rate × Units) / Margin Ratio

Higher leverage amplifies both profits and losses. Most regulated brokers cap retail leverage at 30:1 to 50:1.

Typical Margins by Industry

  • Grocery/retail: 2-5% net margin — high volume, thin margins
  • Restaurants: 3-9% net margin — high labor and food costs
  • Manufacturing: 5-10% net margin
  • Professional services: 15-30% net margin — lower overhead
  • Software/SaaS: 20-40%+ net margin — low marginal cost per customer

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Frequently Asked Questions

How do you calculate profit margin?

Profit margin equals revenue minus cost, divided by revenue, multiplied by 100. A product that sells for $100 and costs $70 earns a $30 profit, which is a margin of 30 / 100 = 30 percent. The result shows how many cents of each sales dollar are kept as profit after the costs included in the calculation.

What is the difference between margin and markup?

Margin is profit as a percentage of the selling price, while markup is profit as a percentage of cost. A $70 item sold for $100 earns $30, which is a 30 percent margin but a 42.9 percent markup. Markup is always the larger number for the same sale, so confusing the two leads to underpricing.

How do I calculate selling price from a target margin?

Divide the cost by 1 minus the target margin written as a decimal. For a $70 cost and a 30 percent target margin, the price is $70 / (1 - 0.30) = $100. Adding 30 percent to the cost instead gives only $91, which is a 23 percent margin and a common pricing mistake.

What is a good profit margin?

A good profit margin depends on the industry. Typical ranges are about 2 to 5 percent in retail, 5 to 10 percent in manufacturing, 15 to 30 percent in services and 20 to 40 percent in software. Compare a business against others in the same sector rather than against a single universal benchmark.

What is the difference between gross margin and net margin?

Gross margin subtracts only the cost of goods sold from revenue, while net margin subtracts every expense, including operating costs, interest and taxes. Gross margin measures how efficiently a product is made or bought, and net margin shows the true bottom line. For the same period, net margin is always lower than gross margin.