Markup and Margin are often mixed up with eachother. Many people mistakenly believe that a product marked up 25% will result in a 25% gross margin. However, it would actually be a 20% gross margin.

The difference is as follows:

The Markup ratio is Profit/Cost

The Margin ratio is Profit/Sell

Here's some Math:

Margin is defined as sales minus cost of goods sold. It is expressed as a ** percentage of sales**.

So if a product is sold for £125 and cost £100 to buy, the profit is £25 and the margin is 20%.

**£25 "profit" / £125 "sell" = 20% margin**

Markup is used to show the difference between a products cost and sell prices. It is expressed as a * percentage of cost*.

So if a product is marked up to a £125 sell price from a £100 cost price, the profit is still £25 and the markup is 25%.

**£25 "profit" / £100 "cost" = 25% markup**

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