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.

The 6 stages of smarter money management

Discover what successful business owners from all over the world do to win at small business finances during every stage of their journey.

Download Guide

Subscribe to our Sage Advice Newsletter

Get our latest business advice delivered directly to your inbox.