The percentage of each sales dollar that represents profit after deducting all expenses, indicating the profitability of a company.
Profit Margin refers to the financial metric that indicates the profitability of a business by measuring the percentage of revenue left after deducting all expenses. It is a key indicator of the business's ability to generate profit from its operations. Profit margin is calculated by dividing the net income (profit) by the total revenue and multiplying it by 100 to express it as a percentage. A higher profit margin indicates greater profitability, while a lower profit margin may indicate lower profitability or potential areas for cost optimization. Small business owners can use profit margin as a benchmark to evaluate their business's financial performance, make informed decisions about pricing, cost management, and growth strategies, and compare their profitability against industry standards.