Gross & Net Profit Margin Calculator
A healthy gross margin can hide a razor-thin net margin — the two numbers answer different questions, and confusing them is one of the most common mistakes reading a profit and loss statement.
Profit margin calculator
Gross margin (how much is left after direct costs) and net margin (how much is left after everything) — two very different numbers that get confused constantly.
Educational illustration only. A healthy gross margin with a thin net margin usually means high operating costs relative to revenue — worth investigating where the gap is going.
The two margins, and what each one actually measures
Gross margin = (Revenue − Cost of Goods Sold) ÷ Revenue. It measures how much is left after the direct cost of producing what was sold — before rent, salaries, marketing, and every other operating expense is paid.
Net margin = Net Profit ÷ Revenue. It measures what’s left after absolutely everything — all operating costs, interest, and tax. A business can have an excellent gross margin and still lose money overall if operating costs are too high relative to revenue.