How to Calculate the Gross Profit Rate of a Selling Price Without the Gross Profit

by Mark Kennan, studioD

Gross profit rate measures the portion of a sale that a company or investor keeps as profit. The simplified formula equals the gross profit divided by the selling price. However, if you do not know the gross profit, you have to calculate it. You can apply the gross profit rate to anything bought and sold. For example, you can determine the gross profit rate on stocks that you invest in, or the gross profit rate for a goods that a company you are considering investing in sells.

Subtract the cost to acquire the item from the selling price of the item to calculate the gross profit. For example, if you paid $800 for a stock and are selling it for $900, subtract $800 from $900 to find your gross profit equals $100.

Divide the gross profit by the cost to acquire the item. In this example, divide $100 by $800 to get 0.125.

Divide the result by 0.01, or multiply by 100, to calculate the gross profit rate. In this example, divide 0.125 by 0.01 to find the gross profit rate equals 12.5 percent.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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