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 ?
and Shoppers Drug Mart (SDM) continued to be the industry's top generators of income, net margin and return on investment.
However, the 2007 net margins per cwt for all operating types were below those of 1997, but higher than in 2002.
From $0 to $1 million in sales, the average net margin of retail bakeries is 4.
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Among the year's highlights were record direct export sales, record net margins in the Marketing Division, record cotton receipts from PCCA members in Taylor, Texas, Northern Oklahoma and Kansas, and a record number of textile mill customers.
The record receipts contributed to the Warehouse Division's combined net margins of $10.
Thus, Melville was able to improve its net margins, which have been off for the nine months, on the coattails of its strong quarter profit performance in the fourth quarter.
Higher efficiencies will show up in higher net margins.
4% earnings gain during its second quarter, a performance that enabled the supermarket and combination store operator to post net margins of over 3% for the seventh consecutive reporting period.
Even though net revenues for the first three quarters of FY2006 were lower than our expectations, we are happy to see significant improvement in gross, operating and net margins.
8 percent in total operating revenue while net margins and patronage to members each soared 39 percent in 2003 (table 1).
In the coming years, we target operating margins in the double digit range as a percentage of revenues and net margins after taxes in the high single digit range.