Profit margin is the ratio of the difference between a product’s selling price and its cost, expressed as a percentage of revenue. It comes in several forms—gross and net being the most common—and is used to measure a company’s profitability.
Why It’s Critical for Business Health
A business with thin margins can lose sustainability even with strong sales volumes. Margin analysis identifies which products or services are most profitable—enabling smarter resource allocation.
Why It’s the Basis of Pricing Strategy
Setting a price requires accounting for both cost and target profit. Pricing without knowing your margin risks operating at a loss. Accurate margin calculations make it possible to set prices that are competitive and profitable.
