Profit margin
Encyclopedia : P : PR : PRO : Profit margin
Profit margin is a measure of profitability. It is calculated using a formula and written as a percentage or a number.
Profit margin = Net income before tax and interest / Revenue
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 unit of currency in tax.
That makes the company's net income 4 units of currency (10 - 6, before tax) and its revenue 10 units of currency. The profit margin would be (4 / 10) or 40%.
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.
See also
External links
- [Calculating Profit Margin] - Why It's important, and how to use Excel to calculate it for you.
- [Yahoo! Finance - Stock Screener - By profit margin]
From Wikipedia, the Free Encyclopedia. Original article here. Support Wikipedia by contributing or donating.
All text is available under the terms of the GNU Free Documentation License See Wikipedia Copyrights for details.