Gross margin shows how much of each sale is left to pay overheads and generate profit. It’s the first margin to watch when costs rise or you discount.
How to use the Gross Margin Calculator
- Revenue
- Cost of goods sold
- Target gross margin
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter revenue and cost of goods sold, and an optional target margin.
Tips
- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.
Common mistakes to avoid
- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.
Inputs explained
| Field | What to enter |
|---|---|
| Revenue | Amount in your currency |
| Cost of goods sold | Amount in your currency |
| Target gross margin | In % |
What each result means
- Gross profit = [Revenue] – [Cost of goods sold]
- Gross margin = [Gross profit]÷[Revenue]×100
- Markup = [Gross profit]÷[Cost of goods sold]×100
- Revenue needed for the target margin = [Cost of goods sold]÷(1 – [Target gross margin]÷100)
Example values
How the main result changes when Revenue changes and everything else stays at the example values above:
| Revenue | Gross margin (%) |
|---|---|
| 125,000 | -28 |
| 187,500 | 14.67 |
| 250,000 | 36 |
| 312,500 | 48.8 |
| 375,000 | 57.33 |
| 500,000 | 68 |
Formula
Gross profit = revenue − COGSGross margin = gross profit ÷ revenue × 100Price for target margin = cost ÷ (1 − target margin)Worked example
Inputs — Revenue: $250,000; Cost of goods sold: $160,000; Target gross margin: 40 %.
Results — Gross profit = $90,000.00; Gross margin = 36 %; Markup = 56.25 %; Revenue needed for the target margin = $266,666.67.
Frequently asked questions
What is a good gross margin?
It varies: grocery 25%, retail 30–50%, software 70–90%.
Is gross margin the same as markup?
No – margin uses revenue, markup uses cost.
What does gross margin exclude?
Operating expenses, interest and taxes.
What formula does the Gross Margin Calculator use?
Gross profit = revenue − COGS.