Profit margin calculator
The same profit in the two numbers people confuse, side by side.
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- We store nothing
- Sources cited
- Last reviewed: September 2026
Enter any two and the rest are worked out. Cost appears in most of them because it is usually the figure you know.
What you actually paid to have the unit, including shipping and duty where those are part of its cost.
The price before VAT. Tax passes through you and is not part of your profit.
Worked out in your browser: nothing is sent to a server
Profit margin
40%
the same as a 66.67% markup on a cost of 60.00 SAR
Breakdown
| Cost | 60.00 SAR |
| Selling price | 100.00 SAR |
| Profit | 40.00 SAR |
| Margin on the priceMargin = profit / selling price. It answers: how much of every riyal I take do I keep? | 40% |
| Markup on the costMarkup = profit / cost. It answers: how much did I add on top of what I paid? | 66.67% |
- Margin and markup are two different numbers for the same profit, and the markup is always the larger. Here a 40% margin is a 66.67% markup. Anyone wanting a 40% margin who adds 40% to the cost ends up with 28.57%.
- Pure arithmetic. It excludes tax, operating costs and commissions. A margin on a unit is not the profit of a business.
How are margin and markup worked out?
- Margin = profit / selling price
- Markup = profit / cost
- Markup from margin = margin / (1 minus margin)
- Margin from markup = markup / (1 plus markup)
Symbols
- Margin
- Profit / selling price. What you keep of every riyal you take, and it never reaches 100%
- Markup
- Profit / cost. What you added on top of what you paid, and it passes 100% freely
- The denominator
- The whole difference is what you divide by: the price for margin, the cost for markup. Which is why they are never equal above zero
How do I price stock costing 60 to make 40%?
A trader whose cost is 60 a unit, wanting a 40% profit margin.
- Adding 40% to the cost: 60 x 1.40 = 84
- The profit is then 24 on a price of 84, which is a 28.57% margin rather than 40%
- To actually make a 40% margin: 60 / (1 minus 0.40) = 100
- At 100 the profit is 40, which is a 40% margin and a 66.67% markup
The two prices are 16 apart on every unit. A 40% margin means a 66.67% markup on the cost, not a 40% one, and that is the confusion this page exists to settle.
What separates the two measures, and what confusing them costs
Work out margin and markup together: enter any two of cost, selling price and the two percentages, and the rest are calculated along with the difference between the measures.
Margin and markup are two different numbers for one profit, and the difference is not a matter of wording. Margin is profit as a share of the selling price, and it answers: how much of every riyal I take do I keep? Markup is profit as a share of the cost, and it answers: how much did I add on top of what I paid? The denominators differ, so the two are never equal except at zero, and the markup is always the larger.
The practical mistake is direct and expensive. A trader wanting a 40% margin on stock costing 60 adds 40% and sells at 84. But the profit is 24 on a price of 84, which is a 28.57% margin, not 40%. To actually make 40% the price has to be 100. Sixteen a unit, and it is why a shop can look profitable on paper and have nothing left at the end of the month.
The conversion between them is fixed: a 20% margin is a 25% markup, a third is 50%, and a 50% margin is a 100% markup. Note that a margin never reaches 100%, because that would mean a cost of nothing, while a markup passes 100% quite happily. And this is pure arithmetic: it excludes tax and operating costs, so a margin on a unit is not the profit of a business.
- Margin = profit / selling price
- Markup = profit / cost
- Markup from margin = margin / (1 minus margin)
- Margin from markup = markup / (1 plus markup)
Questions about profit margin
What is the difference between profit margin and markup?
Margin divides profit by the selling price and markup divides it by the cost. Different denominators make different numbers: a 40% margin is a 66.67% markup, and above zero the markup is always the larger.
How do I price to hit a particular margin?
Divide the cost by (1 minus the margin) rather than adding the margin to the cost. For 40% on a cost of 60: 60 / 0.60 = 100. Adding it directly gives 84 and a margin of only 28.57%.
Why can a margin never reach 100%?
Because a 100% margin means the profit equals the whole price, which is a cost of nothing. As it approaches, the price climbs fast: a 90% margin needs a price ten times the cost. A markup passes 100% with no trouble at all.
Do I calculate on the price before or after VAT?
Before. VAT passes through you to the authority and is not part of your profit, so entering a tax-inclusive price inflates the margin falsely. Take the tax out first and work on the net figure.
Is the margin on a unit the same as the profit of the shop?
No. This is a gross margin on a unit, before rent, wages, marketing and payment fees. A shop with a 40% unit margin might end at a 5% net profit or at a loss, and the difference is the operating costs.
What markups match the common margins?
A 20% margin is a 25% markup, 25% is 33.33%, a third is 50%, 40% is 66.67% and 50% is 100%. The rule is markup = margin / (1 minus margin).
Sources
Reviewed September 2026- Pure arithmetic resting on no statute and no official source: margin and markup are settled accounting definitions rather than a rule issued by any authority
- The price used is the price before VAT, because the tax passes through to the authority and is not part of the seller profit
- These figures are a gross margin on a unit and exclude rent, wages, marketing and payment fees, so they do not describe the profit of a business
Statutory articles this calculator applies
Saudi Labor Law: Royal Decree No. M/51 dated 23/8/1426H (27 Sep 2005), as amended (latest amendment Royal Decree No. M/44 of 1446H, in force 2025-02-19)