Profitability & Margins
Margin vs. Markup
Margin is based on selling price; markup is based on cost. They measure the same profit differently.
Margin vs. Markup: The Key Difference
Both margin and markup measure the relationship between cost and selling price, but from different perspectives:
- Margin = (Price - Cost) / Price
- Markup = (Price - Cost) / Cost
Conversion Table
| Markup | Margin |
|---|---|
| 25% | 20% |
| 50% | 33.3% |
| 100% | 50% |
| 200% | 66.7% |
Which Should You Use?
Most financial reporting uses margin. Pricing and purchasing teams often think in markup. Understanding both prevents costly errors.
Example
Product costs $10, sells for $25. Markup = 150%. Margin = 60%. Same profit ($15), different percentages.
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