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 profi

Profit margin is simply profit shown as a percentage of revenue

See related terms

Gross profit margin

Net profit margin

More terms

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Disclaimer

This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.