Profit Margin: Keeping Margin and Markup Separate When Pricing
A percentage added to cost is a markup; the share of sales retained as gross profit is a margin. Check both before promising a target profit percentage to a client or supplier.
Use the Profit Margin Calculator to enter your own figures and compare the result with the worked example below.
Profit Margin formula
Gross profit = revenue − cost; margin = profit / revenue; markup = profit / cost. Margin measures profit as a share of selling revenue. Markup measures profit relative to cost. They use different denominators.
Worked example
Selling an item for $100 with $60 cost produces $40 gross profit, a 40% margin, and a 66.67% markup.
These are illustrative inputs, not current prices, rates or recommended targets. Where a currency is shown, keep all comparable money amounts in the same currency; conversion examples identify the two sides separately.
How to interpret the result
Include the costs relevant to your chosen gross-profit definition. A gross margin does not account for every operating expense or tax.
Related calculations
Method and further reading
The example follows the FinMathly calculator method. For broader background, see SEC: Understanding financial statements. The background resource may use jurisdiction-specific terms; it does not replace the assumptions of this calculator.
Featured photograph: Pexels.