Profit margin

Profit margin is a measure of profitability. It is calculated as

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net income / revenue = profit margin

Related Topics:
Net income - Revenue

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and expressed as a percentage.

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For example, suppose a company produces bread and sells it for 5 units of currency. It costs the company 3 units of currency to produce the bread and it also had to pay an additional 1 unit of currency in tax.

Related Topics:
Currency - Tax

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That makes the company's net income 1 unit of currency (5 - (3 + 1)) and its revenue 5 units of currency. The profit margin would be (1 / 5) or 20%.

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