Loading the context…
Loading the context…
A specified earnings measure expressed as a percentage of ; the measure used determines which expenses have been deducted.
Save conceptA profit margin expresses an earnings measure relative to . It describes the share of sales represented by that measure, rather than the absolute amount of profit. margin uses . Other margins use earlier earnings measures with different expenses excluded. The name of the margin therefore matters as much as the percentage reported.
The basic calculation divides the relevant earnings amount by and multiplies by one hundred to express the result as a percentage. The numerator and denominator should have matching periods and reporting scopes. A standalone profit should not be divided by . Changes in expenses, prices or product mix can affect the ratio without necessarily reducing total earnings.
Imagine a hypothetical company earns J$100,000 of on J$1 million of . Its margin is 10%. In the next period, J$110,000 of profit on J$1.2 million of gives about 9.17%. Profit rose by J$10,000 while the margin fell. The example shows why a smaller profit share can coexist with higher earnings in money terms.
margin differs from and margin because each deducts a different set of expenses. A percentage difference also differs from percentage-point change: a movement from 10% to 9% is a fall of one . Comparisons need consistent definitions, basis and scope; a higher margin alone does not establish that a business generates more cash.
DMart sales rise faster than profit as quarterly margins narrow