Gross and net profit calculator

How to use

Gross and net profit measure different things in the same business. Gross is what remains from revenue after paying for what the product cost — the cost of goods sold. Net also deducts operating expenses and sales taxes. That is why a business can post a healthy gross margin and a thin, or even negative, net profit.

• See where the operation is eating the product margin.
• Compare months with similar revenue and different profit.
• Bring closed numbers to a conversation with a partner or an accountant.

1. Enter the sales revenue for the period.
2. Enter the cost of goods sold: everything spent on what was sold, in the same period.
3. Enter operating expenses — fixed and variable, excluding cost of goods, so nothing is counted twice.
4. If sales taxes matter, enter the percentage; without it the result stays before tax.

Formula

Gross profit = revenue − cost of goods sold · Net profit = gross profit − expenses − taxes

Example

Revenue of 1,000, cost of goods of 600, expenses of 150 and 10% tax: gross profit of 400 (40% gross margin), taxes of 100 and net profit of 150 (15% net margin).

Limitations

• Expenses are required precisely so the figure called net cannot hide cost that was never informed.
• The calculation covers the period entered; mixing months of different lengths distorts the comparison.
• It does not replace financial statements: depreciation, provisions and financial costs belong in expenses.

Frequently asked questions