profit margin

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Profit margin

Indicator of profitability. 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. Also known as net profit margin.

Profit Margin

A measure of how well a company controls its costs. It is calculated by dividing a company's profit by its revenues and expressing the result as a percentage. The higher the profit margin is, the better the company is thought to control costs. Investors use the profit margin to compare companies in the same industry and well as between industries to determine which are the most profitable.

profit margin

1. The relationship of gross profits to net sales in a business. Net sales are determined by subtracting returns and allowances from gross sales, whereupon the cost of goods sold is then subtracted from net sales to obtain gross profit. Gross profit is divided by net sales to obtain the profit margin—an excellent indicator of a firm's operating efficiency, its pricing policies, and its ability to remain competitive. See also gross profit margin.
2. Net profit margin of a business, which is calculated by deducting operating expenses and cost of goods sold and dividing the result by net sales. This term is less often used to indicate net profit margin.

Profit margin.

A company's profit margin is derived by dividing its net earnings, after taxes, by its gross earnings minus certain expenses. Profit margin is a way of measuring how well a company is doing, regardless of size.

For example, a $50 million company with net earnings of $10 million and a $5 billion company with net earnings of $1 billion both have profit margins of 20%.

Profit margins can vary greatly from one industry to another, so it can be difficult to make valid comparisons among companies unless they are in the same sector of the economy.

profit margin

the difference between the SELLING PRICE of a product and its PRODUCTION COST and SELLING COST. The size of the profit margin will depend upon the percentage profit mark-up which a firm adds to costs in determining its selling price. The size of the profit margin is measured by the PROFIT-MARGINS RATIO.

profit margin

the difference between the SELLING PRICE of a product and its PRODUCTION COST and SELLING COST. The size of the profit margin will depend upon the percentage profit mark-up that a firm adds to costs in determining its selling price, which in turn may be varied in response to changes in demand conditions and competition. See FULL-COST PRICING.

profit margin

The difference between the cost of a unit (house,subdivision parcel,condominium) including a pro rata share of all overhead and other such expenses, as compared to the sales price for that unit.

References in periodicals archive ?
Also, in an important sense, net operating margin represents the long-run performance of the firm since selling servicing is selling the largest single source of revenue.
Table 1--Combined Operating Statement-Top 100, 2002-03 2003 2002 $thousand Revenues Marketing 42,224,706 41,473,012 Farm Supply 15,088,921 11,700,590 Total Sales 57,313,627 53,173,602 Other Operating Revenues 1,025,113 931,834 Total Operating Revenues 58,338,740 54,105,436 Cost of Goods Sold 53,169,267 49,038,973 Gross Margin 5,169,473 5,066,463 Expenses Operating Expenses 4,189,713 4,178,604 Net Operating Margins 979,760 887,859 Other Revenues (Expenses) Interest Expense (422,183) (479,844) Interest Revenue 27,291 36,331 Other Income 334,954 358,402 Other Expenses (113,360) (73,455) Patronage Revenue 99,167 64,201 Net Margins from Operations 905,629 793,494 Non-Operating Rev.
3 percent, to $161 million (due mostly to the cost of processing a very large crop), leaving net operating margins of $70 million in 2002.
On the other hand, cotton, farm supply, rice and sugar cooperatives all had lower net operating margins.
Most of the other commodity groups had mixed results, with the majority having higher net operating margins.