Wednesday, March 23, 2011

What is Profit Margin?

Net profit divided by net revenues, often expressed as a percentage. This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions.
However, the net profit margins are also a good way to to compare companies in different industries in order to gauge which industries are relatively more profitable. also called net margin.

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