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Profit Margin Formula

Probably the most important margin used by businesses to know the total profit percentage over a period of time.

When net profit is divided by sales, the product we get is the profit margin. Usually used by small companies for comparing similar industries. It is denoted in percentage. The more profitable the better.

\[\LARGE Profit\;Margin=\frac{Total\;Income}{Net\;Sales}\]

Gross Profit Margin Formula

\[\LARGE Gross\;Profit\;Margin=\frac{Gross\;Profit}{Net\;Sales}\]

 

Solved Examples

Question 1: Find the profit margin when you buy a pen for Rs. 100 and sell it for Rs. 150.
Solution:

Given Net Sale = Rs.150

Net Profit = Rs. 150 – Rs. 100 = Rs. 150

Profit Margin = $\frac{Net\;Sale}{Net \;Profit}$

Profit Margin = $\frac{$50}{$150}$

Profit Margin=0.33

Hence, the Percentage of Profit Margin = 33.33%

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