Profit Margin Calculator

Profit Margin divides your profit by Revenue (the selling price), showing what share of each sales dollar you keep, while Markup divides that same dollar profit by Cost instead, showing how much you added on top of what the item cost you. For any profitable sale the two percentages are always different — markup is mathematically always the larger figure — so quoting a 50% markup and a 50% margin describe two very different pricing situations. (The one exception is a cost of exactly zero, where markup is mathematically undefined — the calculator shows 0% rather than infinity.)

Subtract Cost from Revenue to get Profit, then divide that profit by Revenue and multiply by 100 to get Profit Margin as a percentage. This calculator does that automatically once you enter Revenue and Cost, and also computes Markup and Cost Ratio (cost as a percentage of revenue) from the same two inputs so you can see all four figures at once.

Dollar for dollar they matter equally: Profit is Revenue minus Cost, so a dollar shaved off Cost adds exactly as much Profit as a dollar added to Revenue. What differs is proportional change — if Revenue is the larger of the two numbers, a 1% move in Revenue is a bigger dollar move than a 1% move in Cost, which is why price changes usually swamp sourcing savings in practice. Profit Margin itself responds to both: raising Cost while holding Revenue fixed always pulls the margin percentage down.

Because markup and margin use different denominators for the identical dollar profit: markup divides by the smaller number (Cost), while margin divides by the larger number (Revenue, which by definition includes both cost and profit). Dividing the same profit figure by a smaller base always produces a larger percentage, so markup outpaces margin on every profitable sale, and the gap between them widens as your margin gets thinner.