Excel allows a user to calculate profit margin percentage from a sale price and cost, using the simple formula. The profit margin is calculated as a rate between price and cost difference and price. This step by step tutorial will assist all levels of Excel users in getting a profit margin percentage.
Figure 1. The result of the formula
Syntax of the Formula
The generic formula is:
=(current_value - original_value)/original_value
The parameters of the formula are:
- current_value – the current value of a purchase
- original_value – the original value of a purchase.
Setting up Our Data for the Example
Let’s look at the structure of the data we will use. In B3, we have the original value and in C3 we have current value after some period. In the cell D3, we want to calculate a rate of return.
Figure 2. Data that we will use in the example
Calculating the Profit Margin Percentage
In our example, the original value is $2,500 (B3) and the current value is $2,800 (C3) Based on these two values, we want to calculate the rate of return in the cell D3.
Formula:
=(C3 - B3)/B3
The parameter current_value is C3 and the original_value is B3.
To apply the formula, we need to follow these steps:
- Select cell D3 and click on it
- Insert the formula:
=(C3-B3)/B3 - Press enter.
Figure 3. Calculating the rate of return percentage
The result in the cell D3 is 12%, which is the rate of return for the above parameters.
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