Profit Margin Formula

Profit margin is a financial metric that shows how much profit a business makes from its sales, expressed as a percentage. It is calculated by dividing the net profit (the money remaining after all expenses are paid) by the total sales revenue, then multiplying the result by 100. Essentially, it indicates the efficiency of a company in converting sales into profit. A higher profit margin reflects better profitability and cost control, while a lower margin may suggest higher expenses or less pricing power. This helps owners and investors understand how well the business is performing financially.