Profit Margin

Profit margin means the percentage of revenue that becomes profit after costs and expenses. In simple terms, profit margin shows how much of each dollar of sales a company keeps as profit. Profit margin is important because it helps investors understand how efficiently a company turns sales into profit. A company with higher margins may have better pricing power, lower costs, or a stronger business model. For example, if a company earns $100 in revenue and keeps $20 as profit, its profit margin is 20%. Profit margin is not the same as revenue. Revenue shows how much money comes in, while profit margin shows how much of that money is kept as profit.