View All Terms
Definition and Examples of
Profit Margin
Explanation: Profit margin is a financial metric used to assess a company’s financial health by revealing the percentage of revenue that exceeds the costs of production (i.e., the profit made on each dollar of sales).
Example: If your online clothing store generates $200,000 in sales and has $150,000 in costs, your profit margin is 25%.
Potential Issues: Misunderstanding or miscalculating profit margins can lead to incorrect pricing strategies, affecting profitability and sustainability.