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PROFIT & MARGIN GUIDE

Profit margin vs markup: what is the difference?

Both numbers measure profit, but they use different reference values. Markup uses cost; profit margin uses selling price.

FORMULA

markup = profit ÷ cost × 100; margin = profit ÷ selling price × 100

WORKED EXAMPLE

If cost is 80 and selling price is 100, profit is 20. Markup is 20 ÷ 80 = 25%. Margin is 20 ÷ 100 = 20%.

STEP BY STEP

01

Find the profit or loss amount

Subtract cost price from selling price. A positive result is profit; a negative result is loss.

02

Calculate markup from cost

Divide profit by cost price. This shows how much was added relative to cost.

03

Calculate margin from selling price

Divide profit by selling price. This shows what share of revenue remains as profit before other costs.