Glossary definition

What is a profit margin?


Profit margin

Profit margin is an accounting function used to measure the profitability of a business. Profit margin is measured by dividing the net income by the net sales. This is a critical element that business owners need to grasp. There are two ways to measure profit margin: gross margin and net profit margin. Each margin measures profitability differently.

For more information on calculating profit and loss, check out our blog post, Checklist: How to prepare a profit and loss (P&L) statement.

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