Glossary definition

What is a 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.

Subscribe to the Sage Advice enewsletter

Get a roundup of our best business advice in your inbox every month.