How to calculate profit, loss and margin

Steps

1. Write down the cost price and the selling price. Here: ₹800 and ₹1,000.
2. Subtract the cost from the selling price: 1,000 − 800 = ₹200. A negative answer is a loss.
3. For the profit percentage, divide the profit by the cost and multiply by 100: 200 ÷ 800 × 100 = 25%.
4. For the margin, divide the profit by the selling price: 200 ÷ 1,000 × 100 = 20%.
5. Or enter the two prices in the profit and loss calculator.

Profit percentage and margin are different

Profit percentage, also called markup, is measured against what you paid. Margin is measured against what you charged. The same ₹200 profit is 25% on cost but 20% on the selling price. A shop that says it earns a 20% margin has added 25% to its cost.

Mixing them up leads to wrong prices. To earn a 20% margin you must charge cost ÷ 0.8, which is ₹1,000 on a cost of ₹800, not cost × 1.2, which is only ₹960.

Working out a loss

Bought for ₹1,200 and sold for ₹900, the loss is ₹300. As a percentage of the cost it is 25%, since 300 ÷ 1,200 × 100 = 25. Measured against the selling price it is −33.33%. A loss percentage is nearly always quoted on the cost.

Another example and some cautions

A cost of ₹500 sold for ₹650 earns ₹150, a profit of 30% on cost and a margin of 23.08%. These are gross figures: they do not include rent, wages, delivery, tax or the discounts you give. For a real business, subtract those costs before calling the amount profit.