Profit Margin

Profit margin is a financial ratio that shows how much profit a business makes relative to its sales. It is calculated by dividing the net profit (the money remaining after all expenses are paid) by total revenue (sales). The result is usually expressed as a percentage. A higher profit margin indicates the company keeps more of each dollar earned as profit, reflecting better efficiency and profitability. For example, a 20% profit margin means that for every $100 in sales, the business retains $20 as profit after covering expenses.