What Is Profit Margin?
Profit margin is profit expressed as a percentage of revenue, showing how much of each unit of sales is kept as profit. Gross margin = (revenue − cost of goods sold) ÷ revenue × 100. Net margin uses net profit after all expenses instead of gross profit.
Example
A product that sells for 100 and costs 60 to make has a gross profit of 40 and a gross margin of 40%.
Margin vs. Markup
Margin divides profit by the selling price; markup divides profit by the cost. The same 40 profit on a 60 cost is a 40% margin but a 66.7% markup, which is why the two numbers are easily confused.
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🔗 Related Terms
More Business & Sales Terms
- Accounts Payable
- Accounts Receivable
- Average Order Value (AOV)
- Balance Sheet
- Burn Rate
- Cash Flow Statement
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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.