In summary, reducing costs helps improve the profit margin.
On the other hand, if the expenses are kept fixed at ,000 and sales improve to 0,000, profit margin rises to = 50%.
Net profit is determined by subtracting all the associated expenses, including costs towards raw material, labor, operations, rentals, interest payments, and taxes, from the total revenue generated.
It indicates that over the quarter, the business managed to generate profits worth 20 cents for every dollar worth of sales.
In the context of profit margin calculations, net profit and net income are used interchangeably.
Similarly, sales and revenue are used interchangeably.
To maximize the profit margin which is calculated as , one would look to minimize the result achieved from the division of (Expenses/Net Sales).