Revenue & Overheads
₹ 1,00,000
₹
₹ 40,000
₹
₹ 20,000
₹
Earnings Summary
Net Profit
₹ 40,000
Gross Margin
60.00%
Net Margin
40.00%
Gross Profit
₹ 60,000
Markup (COGS Based)
150.00%
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Worked Example: Markup and Margin Calculations
Suppose you buy a retail product at a cost price of ₹1,200 and want to sell it at a selling price of ₹1,800:
- Absolute gross profit = ₹1,800 (Selling Price) - ₹1,200 (Cost Price) = ₹600
- Calculate profit margin = (₹600 / ₹1,800) × 100 = 33.33%
- Calculate markup percentage = (₹600 / ₹1,200) × 100 = 50.00%
This sale generates a 33.33% gross profit margin with a 50% markup on cost.
Profit Calculations & Margin Ratios
Operating cash flows are dissected according to the following guidelines:
Gross Profit = Revenue - Cost of Goods Sold (COGS)
Net Profit = Gross Profit - Operating Expenses (OPEX)
Gross Margin (%) = ( Gross Profit / Revenue ) × 100
Net Margin (%) = ( Net Profit / Revenue ) × 100
Frequently Asked Questions
Cost of Goods Sold (COGS) comprises all direct manufacturing costs, including raw materials, plant utility costs directly linked to assembly lines, and factory floor labor costs. It excludes administrative salaries, office rents, marketing, and distribution fleets.
If operating expenses (overheads, marketing, rent) exceed the gross profit made from sales, the business is running at an operational net loss, making the bottom-line net profit negative.