Profit margin

A measure of profitability which shows the percentage of sales that a company keeps in earnings. This gives an indication of how good the company is at cost control and is calculated by dividing net revenues by net profits for a set period. The higher the profit margin the better the company is at converting revenue into profit. It is frequently used to compare companies in operating in both the same and different to gauge which one is generating more profit.

This definition is for general information purposes only