profit margin
profit margin
English Definitions:
margin of profit, profit margin, gross margin (noun)
the ratio gross profits divided by net sales
profit margin (Noun)
The ratio of net income to net sales of a company expressed as a percentage.
Profit margin
Profit margin, net margin, net profit margin or net profit ratio all refer to a measure of profitability. It is calculated by finding the net profit as a percentage of the revenue. profit percentage is calculated with cost price taken as base. Profit margin is calculated with selling price taken as base. Profit margin is the percentage of selling price that turned into profit, where as profit percentage is the percentage of cost price that one gets as profit on top of cost price. So while selling something one should know what percentage of profit will he get on a particular investment so companies calculate profit percentage to check what is ratio of profit on the basis of cost. The profit margin is mostly used for internal comparison Suppose you buy something for $100 and sell it off for $150. cost price = $100 selling price = $150 profit = $150 - $100 = $50 profit percentage = 50% profit margin = 33.33% The profit margin is mostly used for internal comparison. It is difficult to accurately compare the net profit ratio for different entities. Individual businesses' operating and financing arrangements vary so much that different entities are bound to have different levels of expenditure, so that comparison of one with another can have little meaning. A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin.
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