Profit Margin

Profit margin is a profit margin expresses a defined measure of profit as a percentage of revenue. Gross, operating and net profit margins use different profit measures and are not interchangeable.

A simple example

A business with $100 of revenue and $20 of profit under a stated definition has a 20% margin. Change the profit measure and the margin may change too.

Why this matters to income investors

Margins show how much of each revenue dollar remains after specified costs. Stable or improving margins can help support earnings, while compression may weaken dividend capacity.

How to use profit margin in your research

Name the margin being used, compare it with the same company and industry over time, and investigate whether changes come from pricing, volume, costs or accounting items.

This material is general education and information, not individualized investment, tax, or legal advice.