How Percentage Change, Increase, and Margin Work
A common source of confusion in business and finance is the difference between markup and margin, and confusing percent changes with percentage point differences.
1. Percentage Change Formula
Percentage change measures the relative difference between an original value (V₁) and a new value (V₂):
Percentage Change = ((V₂ - V₁) ÷ |V₁|) × 100%
If an item increases from ₹100 to ₹125, the change is ((125 - 100) / 100) × 100% = +25% increase. If it subsequently decreases from ₹125 back to ₹100, the decrease is ((100 - 125) / 125) × 100% = -20% decrease.
2. Margin vs. Markup
Markup is the percentage added to the cost price to determine selling price. Profit margin is the percentage of the selling price that is profit.
For example: If cost is ₹80 and selling price is ₹100, profit is ₹20. Markup = 20 / 80 = 25%. Margin = 20 / 100 = 20%.
| Cost Price | Selling Price | Profit | Markup % | Profit Margin % |
|---|---|---|---|---|
| ₹100 | ₹125 | ₹25 | 25.0% | 20.0% |
| ₹100 | ₹150 | ₹50 | 50.0% | 33.3% |
| ₹100 | ₹200 | ₹100 | 100.0% | 50.0% |
| ₹100 | ₹400 | ₹300 | 300.0% | 75.0% |