The Income|Outcome^® Contextuary

Profit Margin looks at how much of Sales revenue remains as profit after all costs and expenses are paid.

Gross Margin

Ratio: Gross Profit as a percentage of Sales

Operating Margin

Calculation: Operating Income as a percentage of Sales

Profitability or Return on Sales(ROS)

Calculation: Net Income as a percentage of Sales

People will think of profit margins at different points on the Income Statement. Production might look at Gross Margin while operations might look at Operating Margin; the Finance Department looks at Return on Sales.

“What do you mean by that?”

We use ‘margin’ to denote a percentage (of Sales). Some people use ‘margin’ to mean the same as Contribution. Other people use it to mean the same as Gross Profit.