Profit Margin Explained

Profit Margin

What is Profit Margin?

Profit margin is a financial ratio that shows what percentage of revenue remains as profit after all expenses are deducted.

Explanation

Common types of profit margin include:

Gross Profit Margin = (Gross Profit ÷ Revenue) × 100
Operating Profit Margin = (Operating Profit ÷ Revenue) × 100
Net Profit Margin = (Net Profit ÷ Revenue) × 100

High margins indicate strong pricing and cost control. Low margins suggest high operating costs or price pressure.

Practical Example of Profit Margin

If a business makes £100,000 in revenue and nets £15,000 in profit, its net profit margin is 15%.

How Bizcap Can Help:
Need to boost margins? Bizcap can fund upgrades that reduce operating costs or improve sales performance to enhance profitability.

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