Profit margin (overskudsgrad)

The profit margin (overskudsgrad) shows how large a share of revenue ends up as operating profit. It is calculated as operating profit divided by net revenue, multiplied by 100.

The profit margin measures the earning power of the operations themselves: how many øre of each revenue krone become operating profit once all operating costs are paid?

How the profit margin is calculated

Profit margin = operating profit (EBIT) / net revenue × 100. A company with DKK 20 million in revenue and DKK 2 million in operating profit has a profit margin of 10%.

Requires disclosed revenue

The profit margin can only be calculated for companies that disclose their revenue — which most small Danish companies do not. There, earnings must instead be judged from gross profit and the net result.

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Related terms

Operating profit (EBIT)

Operating profit (EBIT — Earnings Before Interest and Taxes) is the result of a company's core operations, before financial items and tax. It shows whether the business itself makes money.

Revenue (omsætning)

Revenue (nettoomsætning) is a company's total income from sales of goods and services in the fiscal year, excluding VAT and net of discounts.

Return on assets (afkastningsgrad)

Return on assets (afkastningsgrad) shows how much operating profit a company generates per krone tied up in assets. It is calculated as operating profit divided by the balance sheet total, multiplied by 100.

Gross profit (bruttofortjeneste)

Gross profit (bruttofortjeneste) is revenue minus the direct costs of delivering goods or services (e.g. cost of goods sold). For most small Danish companies, gross profit is the top line of the published financial statements, because revenue may be omitted.