Profit Margin Calculator
Profit margin is a measure of profitability. It is calculated by finding the profit as a percentage of the revenue. It is one of the most basic indicators to measure the profitability of your business.
Key Terms
- Cost: The total amount spent to acquire or produce the product.
- Selling Price: The final price at which the product is sold to the customer.
- Profit: The difference between Selling Price and Cost.
- Profit Margin: The ratio of profit to selling price. It shows what percentage of the selling price is profit.
- Markup: The ratio of profit to cost. It shows how much percentage is added on top of the cost.
Formulas
- Profit Margin Formula:
((Selling Price - Cost) / Selling Price) * 100 - Markup Formula:
((Selling Price - Cost) / Cost) * 100
How it is Calculated?
For example, if you sell a product for 150 TL that cost you 100 TL:
- Profit: 150 - 100 = 50 TL
- Profit Margin: (50 / 150) * 100 = 33.33%
- Markup: (50 / 100) * 100 = 50%
In this example, 33.33% of your sales price is profit, but you have added a 50% markup on your cost.