Markup Calculator
What Is a Markup?
In finance, markup refers to the difference between the cost of a product or service and its selling price. It's essentially the amount added to the cost price of goods or services to cover expenses and generate profit.
Markup can also be used to define the difference between an investment's lowest current offering price among broker-dealers and the price charged to the customer for said investment. Markups occur when brokers act as principals, buying and selling securities from their own accounts at their own risk rather than receiving a fee for facilitating a transaction. Most dealers are brokers, and vice versa, and so the term broker-dealer is common.
Key Takeaways
- Markup is the difference between the cost of a product or service and its selling price.
- The markup is usually expressed as a percentage of the cost price.
- In retail settings, markups occur when retailers increase the selling price of merchandise by a certain amount or percentage in order to earn a profit.
- A markup is the difference between the market price of a security personally held by a broker-dealer and the price paid by a customer.
- Markups are a legitimate way for broker-dealers to make a profit on the sale of securities.
- Dealers, however, are not always required to disclose the markup to customers.
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