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 ?
According to ministry officials profit margins of marketing companies and dealers had been increased in December last year and the government was of the opinion that due to reduction in prices of petroleum products, profit margins of oil marketing companies and dealers would also be decline proportionately.
Ability aims to achieve 10% in gross profit margin and Altek is expected to see gross profit margin stay at 15% this year.
The "keep your head still" of business financial management is: Watch your gross profit margin.
A GMB study into the profit margins of retailers trading on the high street revealed that Solihull-based Enterprise Inns with 7,616 pubs across the country, has a profit margin before tax and interest of 57.
While Canada was taxing the profits of papermakers at a 63 percent rate and the United States at a 51 percent rate, nation's such as Finland at 43 percent, Indonesia at 34 percent, China at 30 percent and Brazil at 28 percent offered a climate for better profit margins to their paper mills.
While projected profits are no predictor of actual profits, deals that provide too thin a profit margin will not have the room to absorb a rise in project expenses or a drop off in sales revenue.
Calculating net profit margins requires basic mathematics.
In prepared remarks to a meeting of investment analysts in New York City on November 6, 2002, he mentioned three major challenges--improving profit margins, paring down debt, and managing asbestos liability.
The West Midlands was in 26th position, while Worcestershire was right behind it at 27th with profit margins of 4.
Builders who report shrinking profit margins commonly cite factors characteristic of highly competitive and highly regulated markets.
Explosive-growth companies can be so single-minded about growth that they frequently take on additional business simply because it's there--failing to consider the impact on profit margins, working capital and cash requirements.
Sure enough, profit margins increased, asset turnover went up and the stock price jumped.