__PROFIT
MARGIN & PROFIT MARK UP__

Johnny Depp married Amber Heard in February 2015, and she filed for divorce in May 2016, which was finalized in January 2017 and Depp paid a settlement of $7m.

In 2019, Depp
sued Heard for $50m!!!

**What level of profit margin is this???? LOVE
GONE DEAD!!!**

Profit
margin

This
is * gross profit expressed as a
percentage of the selling price*. It is a percentage profit charged on
the sales. So sales represents 100%; where profit margin is 20%; sales will
represent 100% and cost will represent 80%.

__Gross profit__ x 100

Selling price

Profit
mark-up

This
is * gross profit expressed as a
percentage of the cost of goods* which is added to the cost price to
arrive at the selling price. So sales will represent more than 100%; where
profit mark-up is 20%, sales will represent 120% and cost will represent 100%.

__Gross profit__ x 100

Cost price

The mark-up is
a fraction of the cost price, while margin is a fraction of the selling price.
Using profit margin, the selling price/ sales will always be represented at
100%, but with mark-up the selling price/ sales is represented at above 100% by
the mark-up %.

COST + PROFIT =
SALES

Where a
business makes 20% margin, it can be expressed as below;

PROFIT MARGIN =
80% COST + 20% PROFIT = 100% SALES

Where a
business makes 20% mark-up, it can be expressed as below;

PROFIT MARK-UP
= 100% COST + 20% PROFIT = 120% SALES

So, for Johnny
Depp’s position;

Cost price =
$7m

Sales price =
$50m

Profit =
$(50-7)m = $43m

With profit margin,
it will mean that the sales price is 100% and the profit margin is 43/50x100=
86%

With profit mark-up,
it will mean that the cost is 100% and the profit mark-up is 43/7x100= 614%

**The
above two calculations show profit being expressed as a percentage of sales (profit
margin) and cost (profit mark-up).**

## No comments:

## Post a Comment