Profit margin: a measure of profitability
Profit margin is a financial metric used to evaluate a company’s profitability by determining the percentage of revenue that exceeds the costs of production. It represents the dollar value of the markup of a product’s price over its costs.
A higher profit margin indicates that a company is generating more profit from each sale, while a lower profit margin indicates that a company has a lower profit margin. A company with a high profit margin is usually considered to be more financially stable and less risky for investors.
Profit margin can also be used to compare companies within the same industry to determine which ones have the strongest profitability. This measure is important for businesses to monitor and maintain profitability over time, and it is also important for investors to evaluate the financial health of a company before making investment decisions.
« Back to Glossary Index