PROFIT & MARGIN GUIDE
Profit margin vs markup: formula, difference, and example
Markup and profit margin both describe profit, but they use different base values. Markup compares profit with cost price; margin compares profit with selling price.Explore finance & percentage formulas →FORMULA OR CORE IDEA
profit = selling price − cost price; markup = profit ÷ cost × 100; margin = profit ÷ selling price × 100WORKED EXAMPLE
If cost is 80 and selling price is 100, profit is 20. Markup is 20 ÷ 80 × 100 = 25%. Margin is 20 ÷ 100 × 100 = 20%.STEP BY STEP
Find the profit or loss amount
Subtract cost price from selling price. A positive result is profit. A negative result is loss.
Calculate markup from cost price
Divide profit by cost price and multiply by 100. Markup answers how much you added above cost.
Calculate margin from selling price
Divide profit by selling price and multiply by 100. Profit margin answers what percentage of revenue remains as profit before other costs.
Do not treat markup and margin as the same number
A 25% markup does not mean a 25% profit margin because the denominators are different. Markup uses cost, while margin uses selling price.
Use the correct metric for pricing decisions
Use markup when setting a price from cost. Use margin when comparing profitability across products, sales, or business reports.