what is profit margin

Profit margin is a financial ratio that measures the percentage of profit earned by a company in relation to its revenue. Expressed as a percentage, it indicates how much profit the company makes for every dollar of revenue generated. There are different types of profit margins, including gross profit margin, operating profit margin, and net profit margin, each calculated at different levels of a company's income statement. Maintaining a healthy profit margin is important for assessing growth potential, investment viability, and the financial stability of a company relative to its competitors