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Margin Percentage Formula:
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Margin percentage is a financial metric that represents the percentage of revenue that exceeds the cost of goods sold. It indicates how much profit a company makes on each dollar of sales after paying for the cost of goods.
The calculator uses the margin percentage formula:
Where:
Explanation: The formula calculates the proportion of revenue that remains as profit after accounting for the cost of goods sold.
Details: Margin percentage is a crucial indicator of a company's financial health and pricing strategy. It helps businesses determine pricing, control costs, and assess profitability across products and services.
Tips: Enter revenue and cost amounts in the same currency. Both values must be positive numbers, and revenue should be greater than or equal to cost for a valid calculation.
Q1: What's the difference between margin and markup?
A: Margin is calculated as a percentage of revenue, while markup is calculated as a percentage of cost. Margin shows profit as a percentage of sales, while markup shows how much you've increased the price over cost.
Q2: What is a good margin percentage?
A: This varies by industry, but generally, a higher margin percentage indicates better profitability. Typical net profit margins range from 5-20% across different industries.
Q3: Can margin percentage be negative?
A: Yes, if costs exceed revenue, the margin percentage will be negative, indicating a loss on the sale.
Q4: How often should I calculate margin percentage?
A: Businesses should regularly monitor margin percentage - monthly for most businesses, or more frequently for businesses with volatile costs or prices.
Q5: Does this calculator work for gross margin or net margin?
A: This calculator can be used for gross margin (using cost of goods sold) or adapted for net margin (using total expenses), depending on what costs you input.