Profit margin definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Profit margin can be defined as: Ratio of a company’s net income to its net sales; the percent of income in each dollar of revenue; also called net profit margin. Profit margin is calculated a net income divided by revenue, profit margin being a useful calculation because it allows us to see the percentage of sales dollars we are able to keep after expenses, profit margin also being useful as a percent because percentages can be compared to other companies that have different revenue levels, it not being very helpful to compare dollar amount difference in sales and expense between companies of different sizes but comparing the profit margin can give useful information.
