Profit Margin Formula Explained, With Examples
Every profit margin result comes from one formula. Once you understand what goes into it, you can sanity-check any figure you are given, whether by an employer, a bank, a teacher or another website.
The formula
Margin = (price − cost) ÷ price; markup = (price − cost) ÷ cost.
What each input means
- Cost (S$): the value you enter in the calculator.
- Selling price (S$): the value you enter in the calculator.
Example
For example, with these inputs:
- Cost (S$): 60
- Selling price (S$): 100
the calculator returns:
- Profit: S$40.00
- Gross margin: 40.00%
- Markup: 66.67%
How the result changes
The table keeps the other inputs at their example values and changes cost (s$).
| Cost (S$) | Profit | Gross margin | Markup |
|---|---|---|---|
| 60 | S$40.00 | 40.00% | 66.67% |
| 30 | S$70.00 | 70.00% | 233.33% |
| 45 | S$55.00 | 55.00% | 122.22% |
| 75 | S$25.00 | 25.00% | 33.33% |
| 90 | S$10.00 | 10.00% | 11.11% |
Why it matters
Interest rates, instalments and returns compound over years, so a small difference in rate or tenure turns into thousands of dollars. Working the numbers out yourself makes it easier to compare bank offers, avoid expensive debt and plan savings goals.
Interest in Singapore is quoted in several ways. Mortgages and savings accounts use effective annual rates, while car loans and many personal loans are advertised at flat rates that look much lower than their true cost. Banks must disclose the effective interest rate, and comparing on that basis gives a fair picture.
Compounding is the reason long-term saving works: returns earn further returns, so the growth curve steepens over time. The same maths works against you with debt, which is why credit card balances at around 27% a year grow quickly if only minimum payments are made.
Cars in Singapore carry costs found almost nowhere else, including the Certificate of Entitlement and the Additional Registration Fee. Loans are capped at 60% or 70% of the price depending on the car's Open Market Value, and the maximum tenure is seven years.
Related calculations
- Retirement Savings Calculator: Projects retirement savings outside CPF.
- Emergency Fund Calculator: Sets a target for your rainy-day savings.
- Net Worth Calculator: Adds up what you own minus what you owe.
- Debt-to-Income Ratio Calculator: Shows what share of income goes to debt.
Use the Profit Margin Calculator to plug in your own numbers.
Run your own numbers: Profit Margin Calculator