Profit margins refer to financial metrics that indicate the percentage of revenue that exceeds the costs of goods sold (COGS) and other expenses. They are used to assess a company’s profitability and operational efficiency. The two most common types of profit margins are gross profit margin and net profit margin.
Gross profit margin measures the difference between revenue and COGS, divided by revenue, expressed as a percentage. It provides insight into how efficiently a company produces and sells its goods.
Net profit margin, on the other hand, accounts for all expenses, including operating expenses, interest, taxes, and COGS. It is calculated by dividing net profit (total revenue minus total expenses) by total revenue, also expressed as a percentage. This margin reflects the overall profitability of the business.
Profit margins help businesses understand their financial health and can serve as a benchmark for comparison with competitors or industry averages. Higher profit margins generally indicate more efficient management and greater ability to convert sales into actual profit, whereas lower margins may signal potential issues with cost control or pricing strategies.
The company experienced a 12.8% growth in consolidated ordinary profit, reaching 1.45 billion yen, despite a forecasted downturn. Profit predictions for the full year have been nearly doubled, reducing the…