Profit Margin Calculator

Every result on this page comes from a standard accounting identity. The four modes — margin from price, price from markup, full profit-and-loss margins, and break-even analysis — share two building-block formulas and the conversion between them.

1. Margin vs. markup — same profit, different base

Both numbers describe the absolute profit (selling price − cost), but they divide it differently. Gross margin uses the selling price as the base: margin% = (price − cost) ÷ price × 100. Markup uses the cost as the base: markup% = (price − cost) ÷ cost × 100. A product costing 80 and selling for 100 has 20 of profit, which is 25% of the cost (a 25% markup) but only 20% of the selling price (a 20% margin). Margin can never exceed 100%; markup is unbounded. Confusing the two is the most common pricing mistake in retail — a shop intending to make a 30% margin but applying a 30% markup leaves money on the table on every sale.

2. Converting between margin and markup

The two are linked by a closed-form identity. Given a markup, margin = markup ÷ (1 + markup/100). Given a margin, markup = margin ÷ (1 − margin/100). The calculator runs this identity in both directions and shows a Verified badge when the round-trip matches — a low-cost guard against arithmetic typos on busy pricing days.

3. Gross, operating, and net margins

The full P&L stack subtracts expenses in three layers, each yielding its own margin:

• Gross margin = (revenue − COGS) ÷ revenue. Measures pricing power against direct production cost.
• Operating margin = gross profit − operating expenses (rent, salaries, marketing), divided by revenue. Measures whether the core business is sustainable before financing decisions.
• Net margin = operating profit − interest − tax − other items, divided by revenue. The bottom line owners and the tax office care about.

The line-item order follows IFRS IAS 1 (and US GAAP). Mixing VAT-inclusive revenue with VAT-exclusive costs over-states every margin by the VAT rate — use net-of-VAT numbers on both sides for an honest read.

4. Break-even analysis

Break-even tells you how many units must be sold for revenue to equal total costs. The formula: units = fixed costs ÷ (price − variable cost per unit). The denominator is the contribution margin per unit — the amount each sale contributes toward recovering fixed costs. If price is at or below variable cost, contribution is zero or negative and no finite volume reaches break-even; the calculator surfaces this rather than returning Infinity. Above break-even, every additional unit drops the full contribution margin to operating profit.

• Investopedia — Profit Margin (definitions and industry benchmarks)
• Investopedia — Margin vs. Markup (conversion identities)
• Corporate Finance Institute — Profit Margin overview
• AccountingTools — Break-Even Analysis
• IFRS Foundation — IAS 1 Presentation of Financial Statements

Formulas were last cross-checked on 2026-05-11. The page is reviewed annually and whenever the underlying standards (IFRS IAS 1) are amended.