QUICKTOOLS GUIDE
ROI, Margin, and Markup Explained
Keep three commonly confused business calculations separate: return on investment, profit margin, and markup.
In this guideROI compares gain or loss with an initial investment.Margin compares profit with revenue.Markup compares profit with cost.
The key ideas
- ROI compares gain or loss with an initial investment.
- Margin compares profit with revenue.
- Markup compares profit with cost.
How the calculation or process works
Margin = profit ÷ revenue × 100
Markup = profit ÷ cost × 100
Simple ROI = (final value − initial investment) ÷ initial investment × 100
Common mistakes
- Calling margin and markup the same thing.
- Leaving out relevant costs when estimating business profit.
- Comparing investments with different time periods using simple ROI alone.
Use the related QuickTools utility
Once you understand the method, the QuickTools ROI, Margin, and Markup Explained page can handle the repetitive part of the task.
Important: A general guide explains a method; it does not know the rules, assumptions, or requirements of a particular business, contract, institution, or software system. Check those requirements when they matter.