{"id":263973,"date":"2023-06-27T11:46:13","date_gmt":"2023-06-26T23:46:13","guid":{"rendered":"https:\/\/www.reckon.com\/nz\/?page_id=263973"},"modified":"2025-01-29T10:16:00","modified_gmt":"2025-01-28T22:16:00","slug":"how-to-calculate-gross-profit-margin","status":"publish","type":"glo","link":"https:\/\/www.reckon.com\/nz\/glossary\/how-to-calculate-gross-profit-margin\/","title":{"rendered":"How To Calculate Gross Profit Margin"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” locked=”off” global_colors_info=”{}”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f4f4f4″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Definition description” _builder_version=”4.21.0″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n

The basic formula for calculating your gross profit is:<\/p>\n

Gross Profit = Revenue – Cost of Goods Sold.<\/strong><\/p>\n

To turn this into a percentage (or gross margin), the gross profit margin formula<\/a> is:<\/p>\n

Gross profit margin = (Revenue – COGS) \/ Revenue x 100<\/strong><\/p>\n

[\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/nz\/wp-content\/uploads\/2024\/05\/gross-profit.png” alt=”Gross profit = revenue – cost of goods sold Gross profit margin = (revenue – COGS) \u00f7 revenue \u00d7 100″ title_text=”Gross Profit” align=”center” _builder_version=”4.25.0″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text admin_label=”Definition description + related terms” _builder_version=”4.27.4″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n

What is the cost of goods sold?<\/h2>\n

As you can see, to calculate your gross profit you first need to understand your cost of goods sold or COGS.<\/p>\n

COGS are the inputs and expenses which are directly incurred in the production of goods or delivery of services. These can include wages, raw materials, supplies, delivery, packaging et cetera.<\/p>\n

What is revenue?<\/h2>\n

In business ownership, your revenue is the total income created by the sale of your goods or services.<\/p>\n

Why calculate your gross profit margin?<\/h2>\n

Gross profit margins are a useful metric to discover whether your offerings have the potential to generate sufficient revenue, considering production or service delivery costs. Essentially, your gross profit margin calculation tells you what kind of profit you\u2019re making on each sale.<\/p>\n

However, the downside is that there are more business expenses (other than COGS) to be considered in understanding your total profit margin or net profit margin. Your net profit<\/a> will go further to include every single expense your business incurs in its entirety.<\/p>\n

 <\/p>\n

See related terms<\/strong>
What is gross profit?<\/a>
Gross profit vs net profit<\/a>
What is a balance sheet?<\/a><\/p>\n

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The basic formula for calculating your gross profit is: Gross Profit = Revenue – Cost of Goods Sold. To turn this into a percentage (or gross margin), the gross profit margin formula is: Gross profit margin = (Revenue – COGS) \/ Revenue x 100What is the cost of goods sold? As you can see, to […]<\/p>\n","protected":false},"author":6,"featured_media":278501,"menu_order":0,"template":"","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"class_list":["post-263973","glo","type-glo","status-publish","has-post-thumbnail","hentry"],"yoast_head":"\nHow To Calculate Gross Profit Margin | Accounting Terms<\/title>\n<meta name=\"description\" content=\"Learn how to calculate your gross profile margin and discover whether your small business is profitable. 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