[quickthrowman]

Consider an item that costs $80 to produce that you can sell for $100, netting $20 which is a 20% profit margin.

Say your input costs go up 20%, and due to increased competition in your market segment, you can only raise your sell price by 10%. $80 times 1.2 is $96, and $100 times 1.1 is $110, netting $14 which is a 12.72% profit margin.

The price went up, but the margin went down, so you are incorrect.

[likecarter]

I assume we can all do the arithmetic. In the market, stocks will move based on price increases, since cost inputs are assumed to not move, or rarely move - COVID being an exception to the rule.

[ahmeneeroe-v2]

can you do the math but without the price increase to $110 and let us know how that margin compares to the 12.72% profit margin at $100?

[quickthrowman]

If I understand your question, you’re asking what the profit margin would be if the cost went up 20% from $80 to $96 while the sell price stays at $100.

The profit margin would be 4%, $100-$96 leaves $4 of profit. 4/100=0.04, multiply that by 100 to get 4%.

To maintain your previous profit margin if the cost to produce goes up by N%, your selling price must also go up by at least N% at the minimum.

If sell price increase % is higher than cost increase %, your margin will expand. If the reverse is true, your margin will contract.