Business Financials
Gross Profit Margin
40.00%
Gross Profit: $40,000
Operating Profit Margin
20.00%
Operating Profit: $20,000
Net Profit Margin
15.00%
Net Profit: $15,000
Understanding Profit Margins
Profit margin is a measure of profitability calculated as the percentage of revenue that translates into profit. Different types of profit margins provide insights into various aspects of business performance.
Types of Profit Margins
- Gross Profit Margin: Shows profitability after direct costs (COGS). Formula: (Revenue - COGS) / Revenue × 100
- Operating Profit Margin: Shows profitability after operating expenses. Formula: Operating Income / Revenue × 100
- Net Profit Margin: Shows final profitability after all expenses. Formula: Net Income / Revenue × 100
Industry Benchmarks
- Retail: 2-5% net margin
- Technology: 15-25% net margin
- Restaurants: 3-9% net margin
- Consulting: 15-25% net margin