People type this into search every day: net profit margin calculator.
Net profit is the bottom line. Net profit margin divides that bottom line by revenue. FDIC Money Smart’s profit and loss module writes the statement as revenue minus cost of goods sold, then minus overhead, then minus income tax. Profit margin is net profit divided by revenue. Investor.gov’s net income glossary defines net income as profit after every expense and tax. The SEC’s beginners’ guide walks an income statement down to that bottom line.
The net profit margin calculator does the division. It does not compute the tax. You type the tax amount you already have:
Net profit = revenue − COGS − overhead − income tax
Net profit margin = net profit ÷ revenue
Operating profit, on the same page, stops before tax: revenue − COGS − overhead. Gross profit stops even earlier. The gross profit post is that earlier line. One project’s leftover is the project profit calculator. A price built from a target margin on one unit is the markup vs margin calculator.
These are labeled examples. They are not a tax return, a set of books, or business advice.
Fig 1
Revenue down to net profit
Three subtractions, then a division
Take off cost of goods sold, overhead, and the income tax you typed. Divide what remains by revenue.
Example 1. The published studio
The calculator ships this FDIC Money Smart studio.
- Revenue: $100,000
- Cost of goods sold: $10,000
- Overhead: $40,000
- Income tax: $10,000
Gross profit = 100,000 − 10,000 = $90,000.00. That is 90,000 ÷ 100,000 = 90% of revenue.
Operating profit = 90,000 − 40,000 = $50,000.00. That is 50%.
Net profit = 50,000 − 10,000 = $40,000.00.
Net margin = 40,000 ÷ 100,000 = 40%.
Calculator result
Net profit margin
- Revenue
- $100,000.00
- Cost of goods sold
- $10,000.00
- Overhead (operating expenses)
- $40,000.00
- Income tax
- $10,000.00
40%
net profit margin
- Net profit
- $40,000.00
- Operating profit
- $50,000.00
- Gross profit
- $90,000.00
Fig 2 · 1/3
Where the $100,000 goes
Studio example. Costs before tax are COGS plus overhead.
COGS and overhead
$50,000
Income tax
$10,000
Net profit
$40,000
Cost of goods sold and overhead are $50,000.
Income tax is $10,000.
Net profit is $40,000, a 40% margin.
The gross margin is 90%. The net margin is 40%. Half the receipt dollar is gone by the time tax has been subtracted, and the gross line never showed that.
Example 2. What if the tax estimate changes?
Keep revenue at $100,000, cost of goods sold at $10,000, and overhead at $40,000. Operating profit stays $50,000.00, a 50% operating margin. Change only the tax you type. Each extra $5,000 of tax is 5,000 ÷ 100,000 = 5 percentage points of revenue, so the net margin steps down by 5 points.
- Tax $0: net profit $50,000.00. Margin 50%.
- Tax $5,000: net profit $45,000.00. Margin 45%.
- Tax $10,000: net profit $40,000.00. Margin 40%. This is example 1.
- Tax $15,000: net profit $35,000.00. Margin 35%.
- Tax $20,000: net profit $30,000.00. Margin 30%.
Calculator result
Net profit margin
- Income tax
- $20,000.00
30%
net profit margin
- Net profit
- $30,000.00
- Operating profit
- $50,000.00
- Gross profit
- $90,000.00
Fig 3 · 1/5
Net profit as the tax box changes
Revenue $100,000, COGS $10,000, overhead $40,000
Net profit
- Net profit
| Point | Net profit |
|---|---|
| $0 tax | $50k |
| $5k | $45k |
| $10k | $40k |
| $15k | $35k |
| $20k | $30k |
With tax left at $0, net profit equals the $50,000 operating profit.
At the published $10,000 of tax, net profit is $40,000. At $20,000 it is $30,000.
Typing $0 in the tax box prints a 50% net margin. That number is the operating margin. Investor.gov’s net income is profit after tax, so a blank tax estimate reports a profit the glossary would still call pre-tax. The page will not invent the tax for you. Type a cautious estimate, then type a higher one and read both margins.
Example 3. What if overhead rises by $10,000?
Same studio, and the tax stays at $10,000. Overhead moves from $40,000 to $50,000.
Gross profit is still $90,000.00, still 90%.
Operating profit = 100,000 − 10,000 − 50,000 = $40,000.00. That is 40%.
Net profit = 40,000 − 10,000 = $30,000.00.
Net margin = 30%.
Doubling the tax, in example 2, also landed on $30,000 and 30%. The gross line was 90% in both versions. One change was the tax box. The other was overhead. The net margin alone does not tell you which line moved.
Example 4. The gross-profit shop, continued
The gross profit post uses Publication 334’s shop: $300,000 of net receipts and $200,000 of cost of goods sold. Gross profit there is $100,000, a 33.3% gross margin. Keep those two numbers and add overhead and a tax estimate.
- Revenue: $300,000
- Cost of goods sold: $200,000
- Overhead: $70,000
- Income tax: $6,000
Gross profit = $100,000.00. Gross margin = 33.3%.
Operating profit = 100,000 − 70,000 = $30,000.00. Operating margin = 30,000 ÷ 300,000 = 10%.
Net profit = 30,000 − 6,000 = $24,000.00.
Net margin = 24,000 ÷ 300,000 = 8%.
Calculator result
Net profit margin
- Revenue
- $300,000.00
- Cost of goods sold
- $200,000.00
- Overhead (operating expenses)
- $70,000.00
- Income tax
- $6,000.00
8%
net profit margin
- Net profit
- $24,000.00
- Operating profit
- $30,000.00
- Gross profit
- $100,000.00
The gross margin was 33.3%. The net margin is 8%. Quoting the gross figure as “what the shop makes” skips $70,000 of overhead and $6,000 of tax.
Example 5. A year with a wide gross margin and a narrow net margin
- Revenue: $480,000
- Cost of goods sold: $168,000
- Overhead: $240,000
- Income tax: $12,000
Gross profit = 480,000 − 168,000 = $312,000.00. Gross margin = 312,000 ÷ 480,000 = 65%.
Operating profit = 312,000 − 240,000 = $72,000.00. Operating margin = 72,000 ÷ 480,000 = 15%.
Net profit = 72,000 − 12,000 = $60,000.00.
Net margin = 60,000 ÷ 480,000 = 12.5%.
The gross margin is 65%, close to a rich product. Overhead of $240,000 takes most of the $312,000. What remains after tax is $60,000, which is $12,000 more than the studio’s net profit in example 1, on nearly five times the revenue.
Fig 4 · 1/3
Three periods, three stacks
Each stack sums to that period's revenue
- COGS and overhead
- Income tax
- Net profit
| Category | COGS and overhead | Income tax | Net profit |
|---|---|---|---|
| Studio | $50k | $10k | $40k |
| Shop | $270k | $6.0k | $24k |
| Wider year | $408k | $12k | $60k |
Costs before tax are $50,000, $270,000, and $408,000.
Tax is $10,000, $6,000, and $12,000. Net profit is $40,000, $24,000, and $60,000.
The wider year is the tallest stack. Its net-profit slice is $60,000, against a 12.5% margin. The studio’s slice is $40,000, against a 40% margin. The percent and the dollars answer different questions.
Example 6. A loss, with gross profit still positive
- Revenue: $60,000
- Cost of goods sold: $22,000
- Overhead: $50,000
- Income tax: $0
Gross profit = 60,000 − 22,000 = $38,000.00. Gross margin = 38,000 ÷ 60,000 = 63.3%.
Operating profit = 38,000 − 50,000 = −$12,000.00.
Net profit = −$12,000.00, because the tax box is $0.
Net margin = −12,000 ÷ 60,000 = −20%.
A gross-only look says 63.3%. The overhead is larger than that gross profit, so the year loses $12,000. The calculator labels the margin a net loss margin. It does not stop at zero.
Example 7. An owner draw stuffed into overhead
Start from example 1 and add a $36,000 owner draw into the overhead box, as if the draw were an operating expense.
- Revenue: $100,000
- Cost of goods sold: $10,000
- Overhead: $76,000
- Income tax: $10,000
The $76,000 is the original $40,000 plus the $36,000 draw.
Gross profit is still $90,000.00.
Operating profit = 90,000 − 76,000 = $14,000.00.
Net profit = 14,000 − 10,000 = $4,000.00.
Net margin = 4,000 ÷ 100,000 = 4%.
Leave the draw out, and you are back on example 1: net profit $40,000.00, margin 40%. The gap is 40,000 − 4,000 = $36,000, which is the draw itself, and 40 − 4 = 36 percentage points on the printed margins.
FDIC’s lesson spreads equipment through depreciation rather than dropping the whole purchase into one year. A draw has the same kind of problem if your books do not treat it as an expense. Put it in overhead only when your own books do. Otherwise the margin looks like a 4% business that, on the published studio, is a 40% margin before the draw.
Example 8. A small year
- Revenue: $18,000
- Cost of goods sold: $4,000
- Overhead: $6,500
- Income tax: $800
Gross profit = 18,000 − 4,000 = $14,000.00. Gross margin = 14,000 ÷ 18,000 = 77.8%.
Operating profit = 14,000 − 6,500 = $7,500.00. Operating margin = 7,500 ÷ 18,000 = 41.7%.
Net profit = 7,500 − 800 = $6,700.00.
Net margin = 6,700 ÷ 18,000 = 37.2%.
The percent sits near the studio’s 40%. The cash does not. Net profit is $6,700 here and $40,000 in example 1. A margin without the revenue next to it hides that.
Example 9. Consulting, with no cost of goods sold
- Revenue: $140,000
- Cost of goods sold: $0
- Overhead: $42,000
- Income tax: $18,000
Gross profit = $140,000.00. Gross margin = 100%.
Operating profit = 140,000 − 42,000 = $98,000.00. Operating margin = 98,000 ÷ 140,000 = 70%.
Net profit = 98,000 − 18,000 = $80,000.00.
Net margin = 80,000 ÷ 140,000 = 57.1%.
This is the service case from the gross-profit post, carried down the statement. A 100% gross margin became a 57.1% net margin after $42,000 of overhead and an $18,000 tax estimate. The gross line was the whole receipt dollar. The net line is what remains.
Fig 5 · 1/6
Net margin on six periods
Same formula. Different revenue, costs, and tax.
- Net margin
| Category | Net margin |
|---|---|
| Studio | 40% |
| Tax $20k | 30% |
| Shop | 8% |
| Wider year | 12.5% |
| Consulting | 57.1% |
| Small year | 37.2% |
The studio is 40%. With the tax typed at $20,000 it is 30%.
The shop is 8%. The wider year is 12.5%. Consulting is 57.1%. The small year is 37.2%.
Nine net-margin cases side by side
| Example | Revenue | COGS | Overhead | Tax | Net profit | Net margin |
|---|---|---|---|---|---|---|
| 1. Studio | $100,000 | $10,000 | $40,000 | $10,000 | $40,000 | 40% |
| 2. Tax left at $0 | $100,000 | $10,000 | $40,000 | $0 | $50,000 | 50% |
| 2. Tax at $20,000 | $100,000 | $10,000 | $40,000 | $20,000 | $30,000 | 30% |
| 3. Overhead up $10,000 | $100,000 | $10,000 | $50,000 | $10,000 | $30,000 | 30% |
| 4. Shop continued | $300,000 | $200,000 | $70,000 | $6,000 | $24,000 | 8% |
| 5. Wider year | $480,000 | $168,000 | $240,000 | $12,000 | $60,000 | 12.5% |
| 6. Loss year | $60,000 | $22,000 | $50,000 | $0 | −$12,000 | −20% |
| 7. Draw in overhead | $100,000 | $10,000 | $76,000 | $10,000 | $4,000 | 4% |
| 8. Small year | $18,000 | $4,000 | $6,500 | $800 | $6,700 | 37.2% |
| 9. Consulting | $140,000 | $0 | $42,000 | $18,000 | $80,000 | 57.1% |
Example 2 with the tax box at $0 is the operating profit wearing a net-margin label. Example 7 is the studio again, with a $36,000 draw added to overhead.
Open the net profit margin calculator with revenue, cost of goods sold, overhead, and the tax amount you already estimated. The gross line, before those later costs, is the gross profit margin calculator. One unit’s price, from a margin you want, is the markup vs margin calculator.