Question 1

What is the difference between margin and markup?

Accepted Answer

Margin is profit as a percentage of revenue (selling price), while markup is profit as a percentage of cost. For example, if you buy for Rs. 60 and sell for Rs. 100, the margin is 40% (40/100) but the markup is 66.7% (40/60). Margin can never exceed 100%, but markup can be any percentage.

Question 2

What is a good profit margin for a business?

Accepted Answer

Good profit margins vary by industry. Generally, a net margin of 10-20% is considered healthy. Gross margins above 50% are strong. Software companies often have 70-80% gross margins, while retail businesses may have 25-35%. Compare your margins to industry benchmarks for the most accurate assessment.

Question 3

How do I calculate net profit margin?

Accepted Answer

Net Profit Margin = (Net Profit / Revenue) × 100. Net Profit is calculated as: Revenue - Cost of Goods Sold - Operating Expenses - Other Expenses. This gives you the percentage of revenue that becomes actual profit after all costs are deducted.

Financial Calculators