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What is a profit margin?

What is a profit margin?

The net margin is a ratio that measures the profitability of a product. Its the net income divided by the net sales revenue.

If you had a product that sold for $20 and you spent $5 to make the product and $5 to sell it you would make a pretax net profit of $10. If you sold 100 pieces you would make $10,000 in sales and $1,000 in pretax profit.
your net margin would be: $1,000 / $10,000 = .1 or 10%

it is your break even profit. means you have already earned all that you spent.

Profit Margin = Revenues - Expenses

Profit Margin is the excess of all your revenues over your expenses.

Profit Margin Ratio = Profit Margin / Revenues

Profit Margin Ratio is the ratio of your profit over your revenues. That is, if you have a profit margin ratio of of 10%, and your total revenue is $100, it means that you have a net profit (income) of $10 for every $100 revenue you made.

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