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.