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A company earned $6,125 in net income for october. its net sales for october were $17,500. its profit margin is:__________

Sagot :

Profit Margin = Net Income/Net Sales

Profit Margin = $6,125/$17,500 = 0.35= 35%

The profitability of your company can be gauged by looking at your profit margin. How much of each dollar of sales or services is retained as profit is stated as a percentage of those profits. In business, the profit margin is calculated by dividing the net income by the net sales or revenue. To calculate net income, or net profit, a business simply deducts operating costs from sales.

The difference between gross and net profit margins

While a high gross profit margin and solid operational profit margin are great signs, a low net profit margin indicates wasteful spending on non-core business functions. It's a sign that your running costs are higher than the price you're charging for your products or services if the operational profit margin is negative.

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