Fandom

Finance

Profit margin

1,229pages on
this wiki
Add New Page
Talk0 Share

Profit margin is a measure of profitability. It is calculated using a formula and written as a percentage or a number. It can also be called Net Profit Ratio.

Profit margin = Net income / Revenue = Net Profit / Sales Revenue

Mostly used for internal comparison. It is difficult to compare accurately the net profit ratio for different entities. Individual business' operating and financing arrangements vary so much that entities are bound to have different levels of expenditure, that comparison of one with another can have little meaning.

For example, suppose a company produces bread and sells it for 10 units of currency. It costs the company 6 units of currency to produce the bread and it also had to pay an additional 2 units of currency in tax.

That makes the company's net income 2 units of currency (10 - 6, before tax, then minus 2 for tax). Since its revenue is 10 units of currency, the profit margin would be (2 / 10) or 20%.

Profit margin is an indicator of a company's pricing policies and its ability to control costs. Differences in competitive strategy and product mix cause profit margin to vary among different companies.

Discuss!Edit

Talk about everything related to Profit margin in our wiki-based forum.





External resourcesEdit

If you want to add personal links, please do that on your user page - you can also write your profile there. If you have a link with great content that persons using Finance Wikia need, you can add it at Profit margin/Links

This page uses Creative Commons Licensed content from Wikipedia (view authors). Smallwikipedialogo.png

Ad blocker interference detected!


Wikia is a free-to-use site that makes money from advertising. We have a modified experience for viewers using ad blockers

Wikia is not accessible if you’ve made further modifications. Remove the custom ad blocker rule(s) and the page will load as expected.