What is Percentage Margin?
Percentage margin is a term used to describe the difference between a company’s total revenue and total cost expressed as a percentage. It’s typically used as a measure of profitability and can provide insight into how well a company is doing.
How is Percentage Margin Calculated?
The formula for calculating percentage margin is the following:
- Total Revenue – Total Cost = Gross Profit
- Gross Profit ÷ Total Revenue = Percentage Margin
For example, let’s say a company has total revenue of $100 and total cost of $80. The gross profit would be $20 and the percentage margin would be 20%.
What Does Percentage Margin Tell Us?
Percentage margin is a useful metric for evaluating a company’s profitability. It can provide insight into the company’s ability to generate profits from its operations and how well it is managing its expenses. It’s important to note that percentage margin can vary significantly from company to company and from industry to industry. A company with a higher percentage margin is typically more profitable than one with a lower percentage margin.
Conclusion
Percentage margin is a useful metric for evaluating a company’s profitability. It’s important to understand how it’s calculated and what it tells us about a company in order to make informed decisions about investing in a company.