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How To Calculate Margin

How To Calculate Margin

Videojug and Grant Hobson, an experienced finance analyst, show you how to calculate margins using some very simple steps and formulas

Hi, my name's Grant Hobson, I've been a finance analyst for the last six years and today, I'm going to run through some financial performance methods as well as some investment appraisal techniques. How to calculate margins. You'll often have to calculate margins, however to work out a selling price from a cost price, you have to work out what margin a certain selling price would result in.

So, for example, calculate in the margin for the selling price from a cost price, the formula is your selling cost equals your cost divided by 100 minus your margin over 100 gives you your margin percentage, a quick way to view this is as below, so if you look at a product that you want a 5% margin on, you simply divide the cost price by 1 minus 5%, so that'll be 1, 1 divided by 0.95, if you want a 10% margin, it's simply 1 minus 0.1, so therefore you divide your cost price by 0.

9 and similarly for a 15% margin you would do 1 minus 0.15 and divide your cost price by 0.85.

Example of this is below. So if we have a good that costs us £1,000.00 and we want to make a margin of 10%, then the calculation is simply the cost divided by 1 minus 0.

1 which gives us a total sales price for the goods of £1,111.00. Alternatively, we may have a cost price and a selling price and want to calculate what margin this is, so the formula for this is your margin, which equals 1 minus the cost divided by the selling price times by 100 to get your percentage.

So an example of this, if I take the same costs, take the same selling price and the margin will be 1 minus the cost divided by the selling price, which equals 10%. And that would be the margin on this product.