Profit Margin Template
This profit margin template will allow you to calculate the gross profit, EBITDA, and net profit margins.
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Profit margin is a measure of a company’s earnings (or profits) relative to its revenue. The two main types of profit margins are gross profitGross ProfitGross profit is the direct profit left over after deducting the cost of goods sold or cost of sales from sales revenue. It's used to calculate the gross profit margin and is the initial profit figure listed on a company's income statement. Gross profit is calculated before operating profit or net profit. margin (gross profit divided by revenue) and net profit marginNet Profit MarginNet profit margin is a formula used to calculate the percentage of profit a company produces from its total revenue. The profit margin ratio of each company differs by industry. Profit margin = Net income ⁄ Total revenue x 100. Net income is calculated by deducting all company expenses from its total revenue which is (net income divided by revenue).
Profit margin formula
When assessing the profitability of a company, there are two main profit margin ratios to consider: gross and net. Below is a breakdown of each formula.
Gross Profit Margin = Gross Profit / Revenue x 100
Net Profit Margin = Net Income / Revenue x 100
What is a good profit margin?
You may be asking yourself, “what is a good profit margin?” A good margin will vary by industry, but as a general rule of thumb, a 10% net profit margin is considered average, a 20% margin is considered high (or “good”), and a 5% margin is low. Of course, these guidelines can vary widely by industry, company size, and a variety of other factors.
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