Learn / Glossary / Profit margin
GlossaryWhat is Profit margin?
Profit margin shows how many cents of profit a company keeps from every dollar it sells.
The simple explanation
You divide profit by revenue. A 20 percent margin means the company keeps 20 cents of each dollar of sales. Software companies often have high margins, while grocery stores usually have low ones.
An example
A company with 100 dollars of sales and 15 dollars of profit has a 15 percent profit margin.
Why it matters
Margins show how efficient a business is and how much room it has to absorb higher costs.
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Educational information, not financial advice.