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Free Video Tutorials : Excel Formulas
Free Video Tutorials : Excel Formulas
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EXCEL FORMULAS: HOW TO WORK OUT GROSS PROFIT

Find out how to use a formula to work out gross profit in Microsoft Excel

Background information and resources for Excel courses that we hope you find useful

Working out the calculation for marking up a figure or working out gross profit is not the easiest of tasks with a pencil, paper and calculator, let alone translating that into an Excel spreadsheet using formulas.

There is a fundamental difference between mark-up vs profit, and figures can be very different if you are not doing the correct calculation.

CALCULATING GROSS PROFIT

If you owned a stationery shop and bought some nice pens for a cost price of ££££10 each, you'd obviously want to sell these on at a profit. You could mark up the cost price by 25% but this does not mean you are getting 25% profit once you have sold the item. By marking it up by 25%, the new price would be ££££12.50 but if you work it out after the money has gone in the till, the ££££2.50 profit only represents 20% of the total sale price so you have actually made 20% GP.

To earn 25% gross profit, the pen would need to be sold for around ££££13.33 - but how do we work this out? Let's take a look at another example and use Excel to calculate the different outcomes.

Let's say you have a product with a value of ££££100 in B2 and wanted to mark-up that price by 20% - you could simply create the formula:

=B2*1.2
(or =B2*120%)

THE RIGHT FORMULA

This would only give you an extra 20% of the original cost, however. If you were to sell the product for ££££120, you would only return 16.6666667% gross profit because 20% of the sale price (££££120) is actually ££££24.

If you wanted to return 20% profit of the sales price, you would have to do a different calculation:

=B2/(1-0.2)
(or =B2/0.8)

This formula would return ££££125. 20% of ££££125 is ££££25, leaving your cost price of ££££100. That ££££25 is pure profit - go and buy yourself a new t-shirt! (Don't forget your overheads, though.)

WE HOPE YOU FOUND THIS USEFUL

Want to see how we can really help you?

LINKS TO MORE ...

Main Excel Resources Page

Excel Resources

Video tutorials & articles, and templates to help you work better in Excel

      Click to view

 

Video Tutorials - Excel Formulas

Video Tutorials - Excel Formulas

Learn and work with new Excel formulas to help create effective, automated spreadsheets

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Excel Formulas: Circular reference warning

Excel Formulas: Circular reference warning

See what a Circular Reference warning means and how to locate it in your Excel spreadsheet

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Excel Formulas: Calculate difference in dates

Excel Formulas: Calculate difference in dates

Learn how to calculate the difference between two dates in your Excel spreadsheet in a few easy steps

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Excel Formulas: Why a formula doesn't work

Excel Formulas: Why a formula doesn't work

Find out why your formula might not work in Microsoft Excel and how to fix it

      Click to read more

 

Excel Formulas: The DATEDIF function

Excel Formulas: The DATEDIF function

Find out what the DATEDIF function is and how to use it in Microsoft Excel

      Click to read more

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HOW TO WORK OUT GROSS PROFIT IN EXCEL

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