Contents
1 profit
2 profit margin
3 way profit margin calculation
3.1 Method 1
3.2 Method 2
4 profit margin types
5 the importance of profit margin
6 difference between profit and profit margin
Profit
Profit is a major component of national income; it contributes to economic and social impact on societies; individuals are therefore constantly seeking to profit in most areas of life. Profit theory holds a great place among economic studies.
On profit; in order to know its components and controls to obtain a complete picture of it; in order to formulate the appropriate rules to deal with all the foundations of it. [1]
Profit margin
Profit Margin is the profit rate obtained after the payment of taxes on the cost of sales. Profit margin is a measure used to measure corporate profits, and a cost structure indicator. [2] Profit margin is defined as the difference between total
The cost of making a product, and the price at which it is sold. [3] Another definition of profit margin is a measure used to illustrate the nature of corporate and enterprise control over its own costs, and when profit margins increase, companies must control their costs.
Profit margin calculation method
Many people and establishments are interested in calculating the profit margin resulting from their business. The application of this account depends on the following methods:
Method 1
Calculate the profit margin based on the total profit according to the following steps: [5]
Gross profit is calculated initially by applying its own law: Gross profit = Revenue - Cost of goods sold - Operating expenses - Taxes and interest
Compensate the value of the total profit in the law of the profit margin.
Dividing the value of the total profit to the value of the revenue; then we get the profit margin as in the following law: Profit margin = Gross profit / revenue
For example, the company's revenues in 2017 amounted to 100,000 dinars. The cost of the goods sold was about 50,000 dinars. The operating expenses for these goods were about 30,000 dinars, which resulted in interest and taxes of 15,000 dinars. Company? Solution: Compensate the values
in the example with profit and profit margin laws, as follows: Gross profit = Revenue - Cost of goods sold - Operating expenses - Taxes and interest; 100,000 - 50,000 - 30,000 - 15,000 = 5000 Profit margin = Gross profit / revenue
; Ie 5000 / 100,000 = 0.05%
Method 2
The profit margin calculation is based on adding the interest value to the net income and dividing its result on the value of the income according to the following: [6]
Obtain the value of both net income, minority interest (minority interest), adjusted tax, and revenue value.
Collect both net income, interest of minority and adjusted tax together.
The previous revenue is divided by the value of the income to obtain the profit margin, according to the following equation: Profit margin = (net income interest of the minority adjusted tax) الإيرادات Income
For example, in 2017, the company's revenues reached 160,000 dinars. Its net income was about 140,000 dinars, with a modified tax of 20,000 dinars and a minority interest of 30,000 dinars. What is the total profit margin of the company?
Solution: To compensate the values
in the example with the formula for calculating the profit margin, based on the following: Profit margin = (net income interest of the minority adjusted tax) الإيرادات income; ie (140,000 30,000 20,000) 160 160,000 = 1.18%
Profit margin types
The profit margin is divided into the following types: [7]
Gross profit margin: It compares the value of revenue and variable costs; it helps to clarify the profit value of each product, without interest in fixed costs. Variable costs are referred to as the cost of goods sold.
Operating profit margin: Also known as margin ratio, which is the value of both fixed and variable costs, and does not include some forms of financial costs that are useful for business activities because they contain all operating costs and general expenses such as administrative and staff costs and costs And support costs, but they may be misleading and sometimes unclear because they are affected by the value of corporate taxes.
Net profit margin is the net profit after the deduction of the value of the accounts, such as taxes, depreciation expenses and interest expense, and is then divided into net income.
The importance of profit margin
The profit margin of the business is of great importance because it contributes to determining the company's ability to survive for a long period of time. The high profit margin indicates the company's continued success in the future. It is important for the owners of the companies and projects to maintain an appropriate profit margin,
The company's work and the increase of expenses, for example, if the value of expenses and expenses of the company about 5000 dinars, this thing needs to get revenue of 10,000 dinars for the continuation of the company in its work. [8]
The difference between profit and profit margin
When dealing with the margin of profit or profit in the work environment it is important to differentiate between them; in order to understand the nature of the impact of each of them on the results of the work of enterprises, and here is an explanation of the difference between profit and profit margin: [8]
Profit is the money that is obtained from work after subtracting the amount of expenses and expenses from the total revenue. The profit margin is a percentage that refers to the total profit.
The amount of profit earned by businesses determines the amount of money that companies provide when applying their business activities, and helps to determine the nature of investments in the future, while the profit margin contributes to the provision of
