Profit Margin vs. Markup: What's the Difference and How to Calculate Them?

The difference between profit margin and markup lies in the calculation base: profit margin measures profit as a percentage of selling price, while markup measures profit as a percentage of cost. Confusing them can lead to incorrect pricing decisions.

For example, a product costing 80 and selling for 100 generates a gross profit of 20. Its gross profit margin is 20 ÷ 100 × 100 = 20%, while its markup is 20 ÷ 80 × 100 = 25%. Understanding both helps you set prices and evaluate profitability accurately. Try Cash Cloud for free to explore sales, inventory, and profitability reporting tools.