Profit Margin Definition

What Is Profit Margin (FAQs)

What is profit margin?

Profit margin is any profit a company generates goes to its owners, who may choose to distribute the money to shareholders as income, or allocate it back into the business to finance further company growth.

How is profit calculated?

The method of calculating profit is simple: subtract a business’s expenses from its total revenue over a fixed amount of time.

What are the three primary levels of profit?

There are three primary levels of profit of interest to investors: gross profit, operating profit, and net profit.

How is profit margin calculated?

To find profit margin, divide gross income by a company’s revenue then multiply the result by 100 to make it a percentage

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What Is Profit Margin (FAQs)

Profit margin is any profit a company generates that goes to its owners, who may choose to distribute the money to shareholders as income, or allocate it back into the business to finance further company growth.
The method of calculating profit is simple: subtract a business’s expenses from its total revenue over a fixed amount of time.
There are three primary levels of profit that are of interest to investors: gross profit, operating profit, and net profit.
To find profit margin, divide gross income by a company's revenue then multiply the result by 100 to make it a percentage.
The bottom line with profit margin - for both investors and company officers - is that it expresses to what degree the company is making money.
True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.