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Profit Margin Calculator

Calculate profit margin, markup, stock trading margin, and forex margin. Three calculators for business and trading.

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Understanding Profit Margin

Profit margin shows what percentage of each dollar in revenue is actual profit. It's one of the most important metrics for evaluating business performance and comparing companies within an industry.

Margin vs Markup

These are frequently confused. Both measure profit, but from different bases:

  • Margin: Profit ÷ Selling Price — what percentage of the price is profit
  • Markup: Profit ÷ Cost — how much you add above cost

Example

An item costs $120 and sells for $160:

  • Profit: $40
  • Margin: $40 ÷ $160 = 25%
  • Markup: $40 ÷ $120 = 33.33%

Margin-to-Markup Conversion

  • 20% margin = 25% markup
  • 25% margin = 33.3% markup
  • 33% margin = 50% markup
  • 50% margin = 100% markup

Types of Profit Margin

  • Gross margin: (Revenue − Cost of Goods Sold) ÷ Revenue. Measures production efficiency
  • Operating margin: (Revenue − COGS − Operating Expenses) ÷ Revenue. Includes rent, salaries, marketing
  • Net margin: (Revenue − All Expenses − Taxes) ÷ Revenue. The bottom line — what you actually keep

Stock Trading Margin

When buying stocks on margin, your broker lends you part of the purchase price. The margin requirement is the percentage you must fund with your own capital.

  • Initial margin: Minimum equity required to open a position (typically 50% per Reg T)
  • Maintenance margin: Minimum equity to keep the position open (typically 25-30%)
  • Margin call: When your equity drops below maintenance margin, you must deposit more funds or the broker sells your position

Example: 100 shares at $18.30 with 30% margin = $549 required, with $1,281 borrowed from the broker.

Currency Exchange (Forex) Margin

Forex trading uses leverage ratios instead of percentage requirements. The margin is the deposit needed to control a larger position.

  • 20:1 leverage: Control $20,000 with $1,000 margin (5% requirement)
  • 50:1 leverage: Control $50,000 with $1,000 margin (2% requirement)
  • 100:1 leverage: Control $100,000 with $1,000 margin (1% requirement)

Formula: Margin Required = (Exchange Rate × Units) / Margin Ratio

Higher leverage amplifies both profits and losses. Most regulated brokers cap retail leverage at 30:1 to 50:1.

Typical Margins by Industry

  • Grocery/retail: 2-5% net margin — high volume, thin margins
  • Restaurants: 3-9% net margin — high labor and food costs
  • Manufacturing: 5-10% net margin
  • Professional services: 15-30% net margin — lower overhead
  • Software/SaaS: 20-40%+ net margin — low marginal cost per customer

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Frequently Asked Questions

What is profit margin?

Profit margin is the percentage of revenue that remains as profit after costs. Formula: (Revenue - Cost) / Revenue × 100

What is the difference between margin and markup?

Margin is profit as a percentage of selling price. Markup is profit as a percentage of cost. They measure the same profit differently.

What is a good profit margin?

It varies by industry. Retail: 2-5%, Manufacturing: 5-10%, Software: 20-40%, Services: 15-30%.

How do I increase profit margin?

Either increase prices (raise revenue) or reduce costs (lower expenses). Focus on value to justify higher prices.

What is a stock trading margin?

Stock margin is the amount of your own money required to purchase securities on margin (borrowing from your broker). A 30% margin requirement on $1,830 of stock means you need $549 in your account.

What is forex margin?

Forex margin is the deposit required to open a leveraged currency position. With 20:1 leverage, you need only 1/20th of the position value. For example, 100 units at 1.30 exchange rate with 20:1 leverage requires 6.50.