Myth of Profit Margins

For me, dopeness is what I like the most. People who wanna make things as dope as possible. And by default, make money from it. The thing that I like the least, are people who only wanna make money from things whether they’re dope or not, and especially make money from making things [the] least dope as possible.” -Kanye West, 2014

 4. Profit margin and markup are the same. They are not. Profit margin is profit as a percentage of revenue. Profit percentage (or markup) is profit as a percentage of cost (the percentage difference between your cost and the selling price). Another metric is cash margin, which is not expressed in a percentage.” – Andrew Miller, President, ACM Consulting Inc.

I picked number four because most people including myself think/thought they are the same.

Got an iPhone?

gross profit divided by total revenue

http://ycharts.com/companies/AAPL/gross_profit_margin

See article on Startup Master

Got Facebook?

http://ycharts.com/companies/FB/gross_profit_margin

That’s Mark up (profit percentage)!

Most of the Internet believes that profit margin is the made for/retail formula.

It’s not.

Profit Margin is the percentage iPods profit/sold in comparison to total revenue (gross/net) Apple makes.

Here’s a graph

Screen-Shot-2012-10-29-at-10-29-1.45.59-PM
Apple Inc – Gross Profit Margins – Courtesy of Asymco

Now you know.

Watch out for another post on Pricing Strategy in the next couple of days.

The link(s) for Profit Margins below:

Markup Myths

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