What Is Profit Margin?
Definition and plain-English explanation of "Profit Margin"
Profit margin measures how much of each dollar of revenue a company keeps as profit. Gross profit margin = (Revenue - Cost of Goods Sold) / Revenue. Net profit margin = Net Profit / Revenue. Software companies often achieve 20–40% net margins. Retailers typically have margins of 2–5%. Higher margins generally indicate a stronger business model.
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