How do I figure profit margin
Net Income over Net Sales Revenue
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http://www.investopedia.com/terms/p/profitmargin.asp
To calculate the profit margin, you need two pieces of information: the net income and the revenue. The net income refers to the amount of profit earned after deducting all expenses, including operating costs, taxes, and interest. Revenue is the total sales or income generated by a business within a specific period.
Once you have these two values, you can follow these steps to calculate the profit margin:
1. Determine the net income: This information can be found on the income statement or profit and loss statement of a company's financial statements. Ensure that all expenses and taxes are properly accounted for, and calculate the net income.
2. Calculate the revenue: This is the total sales or income generated by the business during the same period. It can also be found on the income statement or profit and loss statement.
3. Use the formula: To calculate the profit margin, divide the net income by the revenue and multiply by 100 to express the result as a percentage.
Profit Margin = (Net Income / Revenue) x 100
For example, if a company has a net income of $50,000 and revenue of $200,000, the profit margin would be:
Profit Margin = ($50,000 / $200,000) x 100 = 25%
Therefore, the profit margin in this example is 25%.
By following these steps and using the necessary financial information, you can easily calculate the profit margin of a business.