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Our free Profit Margin Calculator instantly computes your gross profit, profit margin percentage, and markup percentage from your cost and selling price. Understanding profit margin is essential for pricing strategy, evaluating business performance, and comparing profitability across products or services. This tool is perfect for entrepreneurs, e-commerce sellers, retailers, and finance professionals.

How to Calculate Profit Margin

  1. Enter Your Cost: Input the total cost of goods sold (COGS) or the cost to produce/acquire the product or service.
  2. Enter Your Revenue: Input the selling price or total revenue generated from selling the product or service.
  3. View Your Results: Click Calculate to instantly see your gross profit, profit margin percentage, and markup percentage with formula explanations.

Frequently Asked Questions

What is profit margin?

Profit margin is the percentage of revenue that remains as profit after subtracting costs. Gross margin = (Revenue − Cost) ÷ Revenue × 100.

What is markup?

Markup is the percentage added to cost to arrive at the selling price. Markup = (Revenue − Cost) ÷ Cost × 100.

What is the difference between margin and markup?

Margin is calculated as a percentage of revenue (selling price). Markup is calculated as a percentage of cost. A 50% markup equals a 33.3% margin.

What is a good profit margin?

It depends on the industry. Retail typically targets 20-50% gross margin. Software companies often aim for 70-90%. Check industry benchmarks for your specific sector.

What is gross profit vs net profit?

Gross profit subtracts only cost of goods sold from revenue. Net profit subtracts all expenses including operating costs, taxes, and interest. This calculator computes gross profit.

How do I convert markup to margin?

Margin = Markup ÷ (1 + Markup). For example, a 50% markup = 50 ÷ 150 = 33.3% margin.

Can profit margin be negative?

Yes. If your cost exceeds your revenue (selling below cost), your profit margin and gross profit will be negative, indicating a loss.

Should I use margin or markup for pricing?

Most businesses use margin for financial reporting (aligns with income statement). Markup is common in retail and wholesale for setting prices from cost.