Free tool
Net profit margin calculator, from revenue to net income
Between your revenue and what your business actually earns, there are seven steps. Enter your numbers: the tool works out each one and explains, with your own figures, what it takes away.
Revenue is what a business invoices; net income is what it keeps once every cost is paid. In between, the income statement takes away, in order, the cost of sales, operating expenses, depreciation and amortization, financial costs and tax. Each margin is one of these steps divided by net revenue.
Step by step, with your numbers
- Gross salesGross revenue-
- Net revenueRevenue, turnover-
- Gross profitGross margin in euros-
- EBITDAOperating profit before depreciation-
- Operating incomeEBIT, operating profit-
- Pre-tax incomeEBT-
- Net incomeNet profit, bottom line-
How an income statement is calculated
Net revenue = Gross sales − Discounts and returns Gross profit = Net revenue − Cost of sales EBITDA = Gross profit − Advertising − Other operating expenses Operating income = EBITDA − Depreciation and amortization Pre-tax income = Operating income − Net financial costs Net income = Pre-tax income − Income tax Margin = Step ÷ Net revenue
With the tool’s starting figures: 250,000 € of sales, 10,000 € of discounts and returns, 100,000 € of cost of sales, 20,000 € of advertising, 70,000 € of other expenses, 15,000 € of depreciation, 5,000 € of interest and a 25 % tax rate. Net revenue is 240,000 €, gross margin 58.33 %, and net income 22,500 €, a net profit margin of 9.38 %.
It works like a payslip. Gross pay and take-home pay describe the same salary, and everyone knows which one pays the rent. A business simply has more lines, and each one takes away a family of costs: the product, then running the business, then wear, then debt, then tax.
So each margin reads by what it has already taken away. Gross margin judges your product and your price. Operating margin judges your business. Net margin judges the whole company: two businesses that are identical on the ground can show different net margins purely because of how they are financed.
Four words that read two ways
- “Net revenue” and “net income”. Net revenue is revenue after discounts and returns, at the top of the income statement. Net income is what is left at the very bottom. Two words apart, a whole income statement between them.
- EBITDA. IFRS standards leave each company to calculate its own, so two EBITDA figures compare only after you read how each one is built. In France, the closest figure is the EBE, the excédent brut d’exploitation.
- Operating income or operating profit. IFRS 18 makes operating profit a defined subtotal for annual periods beginning on or after 1 January 2027. Before comparing two operating margins, check which accounting standard each company reports under.
- Your advertising. It is an operating expense: it comes out after gross profit, at the EBITDA step. On the e-commerce accounts I audit, most teams steer everything on ROAS, which works on revenue, so above that step. My recommendation is to judge your advertising on what it leaves at EBITDA: the break-even ROAS calculator makes that link from your margin.
How much of your margin can your advertising take?
That is the calculation I run before touching a budget: it starts from your margin. Let’s talk about yours.
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