ptofit and loss account8

May 13th, 2015
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profit and loss statement describe Profit Margin

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Definition of Profit Margin:A ratio of profitability calculated as netincomedivided by revenues, or net profits divided by sales. It measures howmuch outof every dollarof sales a company actually keeps in earnings.Profit margin is very useful when comparingcompanies in similar industries. A higher profit margin indicates a more profitable company thathas better control overits costs compared toits competitors. Profit margin isdisplayed as a percentage; a 20\% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales.Also known as Net Profit Margin. Profit Margin:Looking at theearnings of a company often doesn't tell the entire story. Increased earnings are good, but an increase does not mean that the profit margin of a company is improving. For instance, if a company has costs that have increasedat a greater rate than sales, it leads to a lower profit margin. This is an indication that costs need to be under better control.Imagine a company has a net income of $10 millionfrom sales of $100 million, givingit a profit margin of 10% ($10 million/$100 million). If in the next year net income risesto $

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