How To Calculate Revenue Using Gross Profit Margin

Gross operating and net.

How to calculate revenue using gross profit margin. Gross profit margin gross profit revenue x 100. Profit margin is a measure of profitability in terms of percentage of sales revenue. 40 000 55 000 73 in other words for every dollar of revenue the business makes 0 73 after paying for cogs. Subtract the cost of goods sold from the revenue to get the gross profit then divide the gross profit by the total revenue which gives you your gross profit margin or gross margin.

When your gross profit calculation is high your business is better positioned to realize a high operating profit margin and a robust net income. Below is a breakdown of each profit margin formula. Net profit margin net income revenue x 100. Taking the time to calculate gross profit margin lets you analyze your company s profit potential.

For example if a company has sales of 1 million and the cost of goods sold totals 750 000 the gross margin sales revenue is 250 000. When assessing the profitability of a company there are three primary margin ratios to consider. Operating profit margin operating profit revenue x 100. Knowing your gross profit margin gives you benchmarks on the path to a healthy net profit.