Calculate gross profit margin percentage.
Gross Profit = Revenue - COGS
Gross Profit Ratio = (Gross Profit / Revenue) × 100
Below 20%
Low profitability, thin margins
20% - 40%
Moderate profitability
Above 40%
High profitability, strong margins
A retail company has the following financial data:
Gross Profit = $500,000 - $300,000 = $200,000
Gross Profit Ratio = ($200,000 ÷ $500,000) × 100 = 40%
Result: The company has a gross profit ratio of 40%, meaning 40% of revenue remains after covering the cost of goods sold.
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