Math CentralQuandaries & Queries


Question from Laura, a parent:

This is going to be put in very general terms.  If my husband says he sold $11,000. worth of tools and made $1400.00 on the deal, what is the percent of proft? The 11,000 is the marked up cost to the customer not what he bought it for.

Hi Laura.

The phrase "percent of profit" isn't precise enough to answer your question simply.

Percentages always have a context and so when we use percentages, it is our responsibility to be clear by saying what quantity this is a percentage of.

The two choices in your case are:

A. Profit margin: this is the percentage comparing net profit to net sales. So in your case, this is 1400/11000 = 12.7 %.

B. Percentage markup: this is the percentage comparing the selling price to its cost minus 100%. So in your case this is 11000/9600 - 100% = 114.6% - 100% = 14.6%.

Both are correct and are derived from the same numbers, but give different results because they have different perspectives. By using the specific business terms profit margin and percentage markup, it is clear what ratio is being expressed as a percentage.

If you want more explanations and examples, search for profit or markup or margin in our question archive.

Stephen La Rocque

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