If you are looking for powerful inventory software that’s easy to use, and provides you with important insights on your margin performance, then try InFlow inventory management software for free: inflow.grsm.io/margin
Gosh! After so much reading, I can't still draw the line btwn these two! But your video made me understand it instantly! Thanks for explaining the PURPOSE of having margin and markup! :)
You are welcome, Charlie! Maybe my video on price vs value would be helpful for you to watch as well: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-2PO9tIt5830.html
You are welcome! I recently made a follow-up video on how to calculate margin and markup in Excel, that might be useful for you as well: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-B6p-agZasys.html
As per your example, sales=100, cost=80, profit=20. profit margin=20%(20/100) which interpretes out of total sales p=20 & markup=25%(20/80), what is the interpretation?Thank you🙏
I think I explained that clearly in the video: it's a fundamentally different attitude as to how you do business. Value-based thinking vs cost-based thinking….
I am a trader and buy goods and sell goods for a profit. In my finance sheet I have a markup column and don’t consider the margin count. Is my approach wrong?
Hi Allen! These terms apply to completely different domains. Markup is used in discussions within the commercial or product management team: what is the cost to manufacture this good or service, and how much can/should/do we add in profit margin on top of that, in order to get to a selling price. ROI is used in capital budgeting discussions: how much is our upfront investment/spend to implement a change, versus how much annual return do we expect to get in return for making this investment. ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-o4of1uNSRis.html
Hello, If I use a logical answer we take for both price and cost, a full amount I mean include taxes, right?... Example: Price Full vs Cost Full not Cost less Taxes 1,990 1,690 1,433 Ty Dr.
Hello Derrick! I have heard of landed cost before, but never really looked into it. However, it seems that others have made RU-vid videos on the topic. Please do a quick search on the term, and hopefully it will answer your question.
Please help! My professor says that the equation for Profit Margin = 1 - cost/price. I have no idea what _this_ equation means because your video says that Profit Margin = profit/revenue. And honestly believe that you are better at this than her. Can anyone tell me what the former equation [Profit Margin = 1 - cost/price] means?
Hello Holly! Your professor and I are using different words for the same thing.... Let's use the numbers from the video. We sell 1 unit at $100 price per unit, so revenue is $100. The cost of the unit is $80, so the profit margin is $100 - $80 = $20. If we translate that to percentages, then your professor says profit margin = 1 - cost/price = 1 - $80/$100 = 1 - 0.8 = .2 = 20%. I say the same thing in a different way, profit margin = profit/revenue = $20/$100 = 20%. Does that make sense?
The Finance Storyteller You are Great..You just Cleared my confusion In this Margin Vs Markup..Your way of explaining is ultimate..How much explaination is enough to clear this topic is already known to you..You are just dropping that words
I'm so confused as to why you do let's say you want 20% proft margin on 100 dollar item cost, then why do you take 100%-20% = 80% and divide below 100 to get that it is 125 revenue cost that you want. Why does one have to take 1-20% ?
Profit margin is calculated as percentage of revenue. If you know the cost of an item, which in your question is $100, and you have a target profit margin of 20% (of revenue), then what is missing in the picture is how much you charge the customer (=revenue) for the item. Revenue minus cost is margin. Revenue is set at 100%, you want margin to be 20%, therefore cost is 100% - 20% = 80%. This means that 80% of the revenue is equal to $100. To get to the revenue, you take $100 divided by 0.8 = $125. In mathematical terms 0.8 is the same as 80%; 1 is the same as 100%; 0.2 is the same as 20%. Hope this helps!
Thanks I understand .8 equals 80% but why do you divide the cost by it. What is intuitively being done by dividing by the percentage .8? I don't get that part?
Dividing by .8 is the same as multiplying by 1.25. 1) Revenue = 100% 2) Margin = 20% of Revenue 3) Cost = 80% of Revenue. We already know the cost in absolute dollar terms, so we can fill in the third of the above equations. It becomes $100 = 80% of Revenue. We want to figure out how much Revenue needs to be, so we rewrite the equation. In simplified math terms, we have to get the "80%" to jump over the "=" sign. Two ways to do that: a) Revenue = $100 / 0.8 = $125. b) Revenue = $100 * 1.25 = $125.
