What is the formula for finding profit percentage?

Answer 1

First, there are two kinds of profit: Gross Profit and Net Profit.

With gross profit, you are basically concerned with the profit involved by selling an item. For example, if you have a vending machine, and you can buy bottles of soft drinks for 25 cents and sell them for 50 cents. The Gross Profit is (Sales - Cost of Goods)/(sales) = (50 - 25)/50 = 1/2, which is 50%. See that Cost of Goods is the cost you paid for the items that you're selling.

But there may be other costs involved in selling drinks from the machine. If you rent the machine, then there is a monthly cost there, or even if you own the machine, there can be repair costs, electricity, etc. All of these costs affect the Net Profit, but generally cannot be tied to the individual sale of one drink. So to figure Net Profit, you take a time period, and add up all costs, then subtract from total revenue (income). To get as a percentage, divide by the revenue.

So say in a month you sold 200 drinks at 50 cents, so your revenue is $100 and your cost of goods on those is $50. Then all of your 'other costs' such as repairs, electricity, gasoline to drive and refill the machine, etc. are $40.

So total costs are now $50 + $40 = $90, and Net Profit = $100 - $90 = $10, and Net Profit Percentage = $10/($100) = 1/10, which is 10%.