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profit margin

/ˌprɑfət ˈmɑrdʒən/
IPA guide

Other forms: profit margins

One way to measure how much money a business makes is to look at its profit margin, the difference between sales and costs. If your lemonade stand has a low profit margin, it's not making you rich.

A business with a high profit margin takes in a lot more money than it spends. If, on the other hand, you buy five-dollar t-shirts, screen print them, and sell them for six dollars each, your profit margin is low — you're making a dollar per shirt, and even less if you consider the time and materials spent on screen printing. In economics, profit margin is calculated as a ratio, defined as "the percentage of the selling price that becomes profit."

Definitions of profit margin
  1. noun
    the ratio gross profits divided by net sales
    see moresee less
    type of:
    ratio
    the relative magnitudes of two quantities (usually expressed as a quotient)
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