How to calculate gross profit margin

Gross profit margin (calculation)

Gross profit margin is gross profit divided by revenue, times 100.

Gross profit margin formula shows that gross profit divided by revenue, times 100, equals gross profit margin.

How to calculate gross profit margin

Example of a gross profit margin calculation

Let’s say your business makes $20,000 by cleaning offices. It costs you $8000 to provide those services. Your gross profit is $12,000. Your gross profit margin is 60%.

Step one example shows $20,000 minus $8,000 equals $12,000.
Step two example shows $12,000 divided by $20,000, times 100, equals 60 percent gross profit margin.

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Disclaimer

This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.