Markup vs Profit Margin - Explained in Hindi - YouTube

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Namaskar my name is Mukul

And you are welcome to the asset yogi

Where we unlock the knowledge of finance

In this video, I am going to discuss a very simple topic

We will see what is the difference between markup and profit margin

I had discussed all the profit margins in the previous video

What are gross profit margins, net profit margin, operating profit margins?

if you haven't watched that video You'll find the link in the description.

You can watch that video. Markup is a similar term of profit margin

Many people get confused about markup and profit margin

So in this video, we'll see what is their difference?

If I give you an example

If the markup of any product

is 50%. Assume you are selling a product

or you buy a product

So if the markup is 50% then the profit becomes 33%

So we will clear this confusion

And we will see how the calculation is done?

Please watch the video till the end. Let's go towards the blackboard.

Let's understand this with the help of an example

There is a shoe manufacturing company and

The cost of making a shoe is

400 Rs

And it sets the price of a pair of shoes is 600 Rs

So first we will calculate the profit

per unit. So here we are talking about profit per unit.

We are talking about gross profit

We are not talking about net profit

What is the gross profit?

It's price- cost

What is the price? 600 - 400(cost)

So what is the profit per unit

It is 200 Rs

So if we have to calculate the profit margin

Then what is the profit margin?

Profit/price

So we are talking about gross profit

We are talking about gross profit margin

So what will we do here?

What is the gross profit? It was 200 Rs. What is the price? 600 Rs

We will divide 200 from 600. What is the answer? It is 0.3333

If I write it in percentage then it is 33.33%

What is its meaning? 33.33% of the price

is your cost.

When you will calculate 33.33% of 600

Then you will get 200 Rs

So if we say it in other words then what will happen is

When you subtract profit margin from price then

When you subtract (1-% of profit margin)

Then what will you get?

We will get the cost.

So in this way, if you want to learn this formula then you can do it.

Otherwise, as I have told you intuitively

If you will do it by understanding first then you can do it easily.

You will not face any major problems. I will also tell you about its application

that how is its application? So this was about how to calculate the profit margin

Remember this, the profit margin

is profit as a percentage of the price.

Similarly, the markup is the percentage of the cost.

So if we have to calculate markup

in this example

Then if our profit is 200 Rs

Then we will divide profit by cost.

What is the cost? It is 400 Rs. So when you will divide 200 by 400 then you'll get 0.5

That means your markup is 50%

So understand this intuitively what it means is

At your cost,

How much markup percentage should you add

That you will get your final price.

This is the markup percentage. If we do the opposite of it

How much profit margin is to be deducted from the price

to get your cost?

Please remember this thing.

If you understand this thing then you will not get confused.

So I will tell you about the markup.

If you want to calculate the price from the markup then what will you do?

Then you will do cost×(1+markup%)

How much markup percentage you should add to get the price

So if you want then you can remember it.

But you will not need it.

What you have to is you have to remember this diagram

We add markup percentage to the cost

And deduct the profit margin percentage from the price.

Then we get the cost.

I will give you one more example.

Assume if we know the markup percentage and profit margin percentage

And we want to calculate the price then what will we do?

Assume the shoe manufacturing company sold the shoes to a shoe retailer

The price was 600 Rs

So the cost of the shoe retailer is 600 Rs

Because he has bought from a shoe manufacturing company at 600 Rs

Now we want that the shoe retailer

to know the price. Assume he wants to earn some profit margin

He wants to know his price.

Let's say he says that

He wants to earn a profit margin of 40%

So tell me what price I should set? See what we calculated?

Price×(1-% of profit margin)

is equal to cost.

This means if you deduct profit margin from the price

Then you will get the cost

That means your price would be

Cost/1-% of profit margin

So how much is it?

Cost is 600 Rs

divided by 1-0.4

The percentage of profit margin is 40% So divide it by 0.4

Then how much will it be? 600/0.6

What would be your price? It should be 1000 Rs

So that your profit margin percentage will be 40%

Similarly, I will give you an example of markup

Assume your cost was 400 Rs

And let's say you want to earn 50% markup on it

What price should you keep? What formula did we see in this

price is equal to we increase the cost by markup percentage

So we will increase it by markup percentage. So what is our cost?

400 Rs. So you will do 400(1+ 0.5)

So it will be 400×1.5

So it will be 600 Rs

Similarly, you can decide your pricing for any product

You have a target, one is markup percentage

Or there is a target of profit margin

So that's all in this video. If you want to share your thoughts

Related to the video or the channel then comment below.

In fact, you can also suggest some topics for future videos.

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Till then keep learning, keep earning, and be happy