Margin in business refers to the difference between the price at which a product is sold and the costs associated with making or selling the product, also known as the cost of goods sold (COGS) . It is a measure of a companys profitability and is expressed as a percentage. There are different types of profit margin that need to be calculated and tracked in order to maintain a clear understanding of a companys financial health. The three main profit margin metrics are:

• Gross profit margin: This refers to the profits a company makes after variable production costs have been deducted but before fixed costs have been accounted for. It is used to get an understanding of how efficiently the company is using its resources such as materials.

• Operating profit margin: This is the revenue minus COGS and operating expenses. It is used to determine how much profit a company is generating from its core operations.

• Net profit margin: This is the revenue minus all expenses, including interest and taxes. It is used to determine the overall profitability of a company.

Calculating profit margins is important for businesses to track their performance and determine if they are hitting the right profit margin. A good profit margin varies considerably by industry, but as a general rule, a higher profit margin is better. Knowing the industry is key to determining if a company is hitting the right profit margin.