profit margin

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Related to Operating Margins: Net profit margin, Operating income

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 ?
TNT revised its outlook for the full year, saying it now expects an operating margin of 17.
The operating margin for the division came in at 9.
The study, which reviewed 990 tax records for 272 non-for-profit, freestanding long term care facilities nationwide, showed that the average home had an operating margin of minus 4 percent during 2000-2001.
The company's operating margins have been negatively impacted by provisions for non-accrual loans.
Operating margins were expected to decline in 2006 because of development spending on new programs, but unexpected cost growth caused margins to fall a higher-than-expected 5.
The Stable Outlook reflects Fitch expectation that patient volume will increase, liquidity will grow, and operating margins will remain at or above the most recent fiscal year's results now that the major capital improvement projects are complete.
4% at the end of 2005, the result of declining operating margins due to an increase in lower margin revenues from the launch of an authorized generic version of Pravachol in April 2006 coupled with steady R&D investment offset by reduced sales and marketing expenses and productivity initiatives.
Wellmont finished fiscal 2006 with an operating margin of 2.
For the last three fiscal years, AVRMC's operating performance was weak with operating margins improving to an unaudited 0.