Gross ↔ Net Profit Converter
Convert between gross profit, operating profit, and net profit — understand how much of every dollar of revenue actually reaches the bottom line.
Revenue waterfall — where the money goes
The P&L Waterfall — Understanding Each Profit Layer
Revenue → subtract COGS = Gross Profit. Subtract operating expenses = EBIT (operating profit). Add back D&A = EBITDA. Subtract interest = EBT. Subtract taxes = Net Profit (PAT — Profit After Tax). Each layer tells a different story: gross margin reveals pricing power and production efficiency; EBITDA is the operating cash proxy; net margin is what the business actually keeps.
For a SaaS business, gross margins of 70–80% are typical. For manufacturing, 20–40% is normal. Always compare margins within the same industry.
Gross Margin % = Gross Profit / Revenue × 100
EBITDA = Gross Profit − OpEx
EBIT = EBITDA − D&A
EBT = EBIT − Interest
Net Profit = EBT × (1 − Tax Rate)
Net Profit Margin = Net Profit / Revenue × 100
💡 What This Means for You
If you’re analysing a company to invest in, focus on net profit margin trends over 3–5 years. A rising net margin signals improving operational leverage. A falling net margin despite growing revenue may signal rising costs or pricing pressure. For your own business, aim to understand which cost line is your biggest lever for improvement.
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