Profit Margin Definition

Profit margin is a ratio of success calculated as net gain divided by gross income, or net revenue divided by product sales. It measures how much of all the dollar of sales a corporation actually keeps inside earnings. Profit margin is quite useful when contrasting companies in comparable industries. A higher profit margin indicates a profitable company that’s better control around its costs when compared with its competitors. For calculation, Net Profit Margin = Net Profit / Revenue, where Net Profit = Revenue – Cost.