06:59
Faizan
The simple profit margin calculates the percentage of the company's total revenues that represent profit after accounting for all expenses. The simple profit margin can help businesses see if they need to streamline their operations to increase their profits, because expenses are eating away at the revenues too much. Investors also look at a company's simple profit margin to determine how efficiently a company turns sales into profits. To figure the simple profit margin of a company, you need to know the company's total sales and total expenses.
Subtract the company's costs from the company's total revenues to find the company's net profits. For
example, if your company brings in $15 million in sales and has expenses of $12 million, its net profit equals $3 million.
Divide the company's net profit by the total sales to find the simple profit margin as a rate. In this example, divide the net profit of $3 million by the total sales of $15 million to get 0.2.
Multiply the simple profit margin as a rate by 100 to find the simple profit margin as a percentage. Completing this example, multiply 0.2 by 100 to find a simple profit margin of 20 percent, which means that 20 cents of ever dollar of revenue stays with the company as profit.
Subtract the company's costs from the company's total revenues to find the company's net profits. For example, if your company brings in $15 million in sales and has expenses of $12 million, its net profit equals $3 million.
Divide the company's net profit by the total sales to find the simple profit margin as a rate. In this example, divide the net profit of $3 million by the total sales of $15 million to get 0.2.
Multiply the simple profit margin as a rate by 100 to find the simple profit margin as a percentage. Completing this example, multiply 0.2 by 100 to find a simple profit margin of 20 percent, which means that 20 cents of ever dollar of revenue stays with the company as profit.
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