Profit margin is very useful when comparing companies in similar industries. A higher profit margin indicates a more profitable company that has better control over its costs compared to its competitors. Profit margin is displayed as a percentage; a 20\% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales.
Also known as Net Profit Margin.
Looking at the earnings of a company often doesn't tell the entire story. Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. For instance, if a company has costs that have increased at a greater rate than sales, it leads to a lower profit margin. This is an indication that costs need to be under better control.
Imagine a company has a net income of $10 million from sales of $100 million, giving it a profit margin of 10% ($10 million/$100 million). If in the next year net income rises to $15 million on sales of $200 million, the company's profit margin would fall to 7.5%. So while the company increased its net income, it has done so with diminishing profit margins.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
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. Net profit Margin = (Net Income / Revenue) x100 The profit… … Wikipedia
profit margin — profit margins N COUNT A profit margin is the difference between the selling price of a product and the cost of producing and marketing it. The group had a net profit margin of 30% last year … English dictionary
profit margin — See: margin Category: Business, LLCs & Corporations Nolo’s Plain English Law Dictionary. Gerald N. Hill, Kathleen Thompson Hill. 2009 … Law dictionary
profit margin — profit .margin n the difference between the cost of producing something and the price at which you sell it … Dictionary of contemporary English
profit margin — profit ,margin noun count the difference between how much money you get when you sell something and how much it costs you to buy or make it … Usage of the words and phrases in modern English
profit margin — ► NOUN ▪ the amount by which revenue from sales exceeds costs in a business … English terms dictionary
profit margin — the amount that the price of a product or service is raised above its cost in order to provide a gross profit. Glossary of Business Terms indicator of profitability. The ratio of earnings available to stockholders to net sales. Determined by… … Financial and business terms
Profit margin — Indicator of profitability. The New York Times Financial Glossary The ratio of earnings available to stockholders to net sales. Determined by dividing net income by revenue for the same 12 month period. Result is shown as a percentage. The New… … Financial and business terms
profit margin — noun the ratio gross profits divided by net sales (Freq. 3) • Syn: ↑margin of profit, ↑gross margin • Hypernyms: ↑ratio * * * noun, pl ⋯ gins [count] : the difference between the cost of buying or making something and the price at which it is… … Useful english dictionary
profit margin — Gen Mgt the amount by which income exceeds expenditure. The profit margin of an individual product is the sale price minus the cost of production and associated costs such as distribution and advertising. On a larger scale, the profit margin is… … The ultimate business dictionary