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Profit Margins

Profit Margins

Just as there are three types of profits—gross, operating, and net—there are also three types of profit margins that can be calculated to offer insight into a company’s profitability. Gross margin is simply gross profits divided by revenues, and so on. Margins are usually stated in percentages.

Here are the formulas:

Gross Margin = (Gross Profits) / Revenues

Operating Margin = (Operating Profits) / Revenues

Net Margin = (Net Profits) / Revenues