Profitability
Margin from revenue and cost
The standard form. Profit left after cost, expressed as a share of what the customer paid. Multiply by 100 to read it as a percentage.
The Formula
m = (R - C) / R
The standard form. Profit left after cost, expressed as a share of what the customer paid. Multiply by 100 to read it as a percentage.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| R | Revenue | currency | What customers paid over the period, before any costs come off. |
| C | Cost of what was sold | currency | Cost of goods sold for gross margin, or fully loaded cost for net margin. |
| m | Profit margin | ratio | A decimal between 0 and 1 in any ordinary sale. Capped at 100%. |
What Each Symbol Means
Rcurrency
Revenue
What customers paid over the period, before any costs come off.
Ccurrency
Cost of what was sold
Cost of goods sold for gross margin, or fully loaded cost for net margin.
mratio
Profit margin
A decimal between 0 and 1 in any ordinary sale. Capped at 100%.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate profit margin page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Profit Margin, filed under Business. Every number the guide produces comes from substituting into this one line.