Net profit margin is the amount of money a business makes after deducting all costs and expenses.

Here’s the formula for calculating net profit margin…

Net Profit / Net Revenue = Net Profit Margin %

Example: $500 / $1,000 = 50% Net Profit Margin

In this example, our net profit is $500 and our net revenue is $1,000. This means that our net profit margin is 50%.

Gross profit margin is the amount of money a business makes after deducting the cost of the goods sold (COGS).

The formula for calculating gross profit is very simple…

(Net Sales - COGS) / Net Sales = Gross Profit Margin %

Example: ($500 - $200)/ $500 = 60% Gross Profit Margin

In this example, our net sales are $500 and the cost of our products was $200. Our gross profit margin, then, is 60%.

Operating profit margin is how much money a business makes on a dollar of sales (as a percentage) after paying for production costs but before paying interest or tax.

Here’s the formula for calculating operating profit margin…

Operating Income / Revenue = Operating Profit Margin %

Example: $1,000 / $2,000 = 50% Operating Profit Margin

In this example, our operating income is $1,000 and our revenue is $2,000, which means that we have an operating profit margin of 50%.

Pre-tax profit margin is how much money a business makes on a dollar of sales after paying for all expenses, but before deducting taxes.

Here’s the formula for calculating pre-tax profit margin…

Profit Before Tax / Net Sales = Pre-Tax Profit Margin %

Example: $1,000 / $10,000 = 10% Pre-Tax Profit Margin

In this example, we made $1,000 in pre-tax profit and our net sales were $10,000. This means that our pre-tax profit margin was 10%.