As a whole, Profit margin is a ratio of all profit generated divided by the revenue. In other words, it can be represented as how many cents you keep per dollar of sales. Also referred to as “Rate of Return”, this concept is used to determine how profitable your company or organization currently is. Of course, there are many different types of margins with each with a unique use.

The three variants of profit margin are:

Gross Margin: the value of net sales value minus the expenses tied to sold goods.

Operating Margin: the ratio of all your Operating Expenses divided by net sales (revenue), not including taxes or interest.

Pretax Margin: used to assess the operating efficiency of an organization. It is measured by determining how many cents are kept per dollar of sale without deducting taxes, and after paying for interest/debt, if any.

References:

• https://www.investopedia.com/terms/p/profitmargin.asp
• https://www.thebalance.com/profit-margin-types-calculation-3305879#:~:text=The%20profit%20margin%20is%20a,always%20expressed%20as%20a%20percentage.