Margin Formula:
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Margin is a financial metric that shows what percentage of revenue has turned into profit. It measures how much out of every dollar of sales a company actually keeps in earnings.
The calculator uses the margin formula:
Where:
Explanation: The formula calculates the proportion of revenue that remains after accounting for costs, expressed as a percentage.
Details: Margin is crucial for assessing business profitability, pricing strategies, and financial health. It helps compare performance across different periods or companies.
Tips: Enter revenue and cost in USD. Both values must be positive numbers, and revenue must be greater than zero.
Q1: What's a good margin percentage?
A: This varies by industry, but generally 10% is average, 20% is good, and 5% is low. Service businesses often have higher margins than manufacturers.
Q2: What's the difference between margin and markup?
A: Margin is (Revenue - Cost)/Revenue, while markup is (Price - Cost)/Cost. Margin shows profitability percentage of revenue, markup shows how much cost is increased to get selling price.
Q3: Can margin be negative?
A: Yes, negative margin means costs exceed revenue, indicating the business is losing money on each sale.
Q4: How often should margin be calculated?
A: Businesses should track margins regularly (monthly or quarterly) to monitor profitability trends.
Q5: What affects margin?
A: Factors include pricing strategy, cost control, sales volume, product mix, and operational efficiency.