What is a 'Profit Margin'?

Profit margin is a profitability ratios calculated as net income divided by revenue, or net profits divided by sales. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

| Term of the Day Profit Margin Profit margin is a profitability ratios calculated as net income divided by revenue, or net profits divided by sales. Net income or net profit may be determined by subtracting all of a company's expenses, including operating costs, material costs (including raw materials) and tax costs, from its total revenue. Profit margins are expressed as a percentage and, in effect, measure how much out of every dollar of sales a company actually keeps in earnings. A 20% profit margin, then, means the company has a net income of $0.20 for each dollar of total revenue earned. Breaking it Down: Rarely can a company's individual numbers (like revenue or expenditures) indicate much about the... Read More » Related to "Profit Margin" A Look At Corporate Profit Margins Take a deeper look at a company's profitability with the help of profit margin ratios. Read More » Profit margin versus operating margin: What's the difference? There are some distinctions between profit margin and operating margin. Both measure efficiency of a firm, but one takes a wider look at costs versus profits. Read More » How are profit margin and markup different? Profit margin and markup are two different accounting terms that use the same inputs and analyze the same transaction, yet they show different information. Read More » Related Definitions Contribution Margin Contribution margin is a cost accounting calculation that tells a company the profitability of an individual product. Read More » Net Income - NI Net income is equal to net earnings calculated as sales minus cost of goods sold, selling, general and administrative expenses, operating expenses, depreciation, interest, taxes and other expenses Read More » Adjusted Gross Margin Adjusted gross margin is a calculation used to determine the profitability of a product, product line or company. Read More » Cost of Goods Sold - COGS Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company. Read More » CONNECT WITH INVESTOPEDIA Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here. 114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC, All Rights Reserved | Privacy Policy