Filter by Categories
Accounting
Banking

Financial Analysis




Profit Margin


A profitability measure which relates net income to sales:

Profit Margin

For example, if net income and sales of a given company are $30,000 and $270,000, respectively; then, its profit margin is:

Profit margin= 30,000/ 270,000= 11.11%.

It indicates that the company generates more than 11 cents in profit for every dollar in sales revenue. Generally speaking, the higher this ratio, the better. However, this ratio differs substantially from industry to another. Retail stores have a low profit margin (2-3%), while specialty goods sell for considerably higher margins (20-30% and even more).

It is also referred to as return on sales (ROS).



ABC
The financial analysis of companies is essentially undertaken with the aim to assess their performance in light of their objectives and strategies ...
Watch on Youtube
Remember to read our privacy policy before submission of your comments or any suggestions. Please keep comments relevant, respectful, and as much concise as possible. By commenting you are required to follow our community guidelines.

Comments


    Leave Your Comment

    Your email address will not be published.*