What is profit margin?

Profit margin (definition)

Profit margin is the percentage of revenue left after paying business expenses.


There are two main types of profit margin.

  • Gross profit margin – the portion of income left after paying for the goods and services you sell 
  • Net profit margin – the portion of income left after paying all costs and taxes

As a result, your gross profit margin will be larger than your net profit margin.

A chart shows profit margin as a portion of the income the business gets to keep after meeting some expenses (the gross profit margin) and all expenses and taxes (the net profit margin).

Profit margin is simply profit shown as a percentage of revenue

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