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 ?
Says Budhbhatti: "Consumer goods and construction sectors are likely to benefit from lower raw material costs and steady sales realisations resulting in better operating profit margins. In case of real estate, there has been some traction in terms of project completion and sales vis-Ei-vis previous periods, which resulted in improvement." Margins of information technology companies, however, were a mixed bag.
In the Mean-Variance approach and the Mean-VaR approach, the mean or expected value of historical operating profit margin is used.
Adjusted operating income jumped 26.4% to $142.5 million, and operating profit margins rose 55 basis points to 13.8% of sales.
"Top line revenue growth has been good and we have made further progress towards our goal of mid-teen operating profit margins, chief executive Mark Robertshaw said.
Some BPO providers currently enjoy operating profit margins as high as 40% to 50%, but this will level out to between 20% and 25% as the market matures, according to a new report from Framingham, Massachusetts-based IDC and India's Associated Chambers of Commerce and Industry (Assocham).
Berkshire Hathaway's Buffalo (N.Y) News, for example, maintained operating profit margins over 30% for three years.
The ratings mirror the firm's strong market position in the Uttar Pradesh region, being the largest dealer of Maruti Suzuki Cars there, as well as its stable operating profit margins and highly-experienced promoters.
The company raised its interim dividend by 50 per cent to 2.25 pence and said all three of its divisions were now delivering double digit operating profit margins.
Pharmaceutical: A recent survey of pharmaceutical licensing practices revealed that drugs licensed during the later stages of clinical trials generate twice as much cash as drugs developed "in-house." While operating profit margins of "in-house" licensing are higher due to the fact that the company doesn't have to pay royalty fees to the discoverer, companies have to wait up to 14 years before the product reaches the market, creating very high opportunity costs.
Conversely, a typical for-profit would likely have the following operating profit margins: nursing at 8 percent to 15 percent, assisted living at 28 percent to 32 percent, and independent living at 43 percent to 48 percent.
While their revenue grew at the slowest rate in five years, newspaper companies reported 1989 pretax operating profit margins of 17.4%, compared with the 14.1% average for all media companies.