Profit margin gauges the degree to which a company or a business activity makes money. It's expressed as a percentage, indicating how many cents of profit the business has generated for each dollar of sale.
 | | Term of the Day | Words to Know | | |  | | Profit Margin | Profit margin is one of the commonly used profitability ratios to gauge the degree to which a company or a business activity makes money. It represents what percentage of sales has turned into profits. Simply put, the percentage figure indicates how many cents of profit the business has generated for each dollar of sale. For instance, if a business reports that it achieved a 35% profit margin during the last quarter, it means that it had a net income of $0.35 for each dollar of sales generated.
There are several types of profit margin. In everyday use, however, it usually refers to net profit margin, a company's bottom line after all other expenses, including taxes and one-off oddities, have been taken out of revenue. | | Read More » | | Related to "Profit Margin" | | | | SPONSORED BY INVESCO | | The Complete Guide to ETFs | | ETFs are becoming increasingly popular and soaring to new heights among investors. Invesco's insights can help you determine if these investment vehicles are right for you. | | Learn More » | | | Sign Up for 'Chart Advisor' | | Want more Investopedia market news? Investopedia's expert analysts present market performance for the day and discuss with in-depth charting and technical analysis, a must read for traders. | | Subscribe» | | | Profitability Ratios | | Profitability ratios are a class of financial metrics used to assess a business's ability to generate profit relative to items such as its revenue, operating costs, or balance sheet assets over time. | | Read More » | | | Bottom Line | | The bottom line refers to a company's net earnings, net profit, net income or earnings per share (EPS). Companies try to improve their bottom line by growing revenue and increasing efficiency. | | Read More » | | | Income Statement | | An income statement is one of the three major financial statements that reports a company's financial performance over a specific accounting period. | | Read More » | | | Operating Margin | | The operating margin measures how much profit a company makes on a dollar of sales, after paying for variable costs of production, such as wages and raw materials, but before paying interest or tax. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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