ESYB2 055 - Example of Calculating Profit and Margin
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[00:00:00] Now, let's go over an example of how to count the gross profit, non profit and operating profit and the profit margins for all of these in a fictitious business plan for my mobile apps. And of course, all the financial figures are fictitious because obviously I'm private about my own finances here. So, the total revenue is 125, 000.

The cost of goods, basically a salary for programmers, which is me in this case, and design is total 67, 000. So I subtract.

That's the gross profit. Then we keep going. The operating profit basically takes additional expenses. For example, I have marketing costs, accounting costs, other costs, and these are listed here. And you would figure out what those additional costs are for you. And you would just. Subtract them further from the gross profit.

So I ended up with [00:01:00] 54, 000 as my operating profit. And the net profit, you subtract taxes, interest, or debt. So basically just further subtract and you get those numbers. Then you can calculate the profit margin for all of these. You got your gross profit margin, operating margin, and net margin. All you do is you take the original revenue, you keep that number.

And whatever that number you came up with for the gross profit see I came up with 58, 000 so you would put it here and 42, 000 for The operating profit, I just enter it here. And so I divide, for example, the 42,500 by 1 25 and I get 0.34, which is in percentage terms, you essentially just say 34%. So your net profit margin is 34% gross profit margin is 46% and so on.

So that's how you do these calculations. Usually if you have more complex finances, you would do this in Excel and. Itemize them line by [00:02:00] line, but here, just because it's a relatively simple example, I did it all for you here so that you can see how actually pretty easy this can be to calculate.

