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 ?
Net profit margin has been adjusted to exclude taxes and include owner compensation in excess of their market-rate salaries--adjustments commonly made to private-company financials in order to provide a more accurate picture of the companies' operational performance.
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Stevens Transport is nationally recognized as a top-performing fleet in Highest Net Profit Margins and Lowest Operating Ratio.
in Los Angeles, we selected companies with sales in the $5 million to $750 million range ("small" by FORBES standards), net profit margins greater than 5% and share prices above $5 as of Oct.
Companies were required to have a stock price above $5 per share on October 1st, and net profit margins greater than 5 percent.
Only companies with sales in the $5 million to $750 million range, net profit margins greater than 5% and share prices above $5 as of October 1, 2004 were considered.
To qualify for inclusion on the list, companies must show a consistent pattern of positive growth during a five-year period, as well as over the last 12 months in addition to sales in the $5 million to $750 million range, net profit margins greater than 5 percent and share prices above $5 as of October 1.
They selected qualifying companies based on their sales in a $5 million to $750 million range along with net profit margins greater than 5% and share prices above $5 as of October 1 of this year.
In order to qualify for the list, each company was required to demonstrate sales in the $5 million to $750 million range, net profit margins greater than 5% and a share price above $5.
Companies must have a stock price above $5 per share as of October 1, and net profit margins greater than 5 percent.