Calculating Profit Margin

To calculate the profit margin, investors can examine a company’s net profit margin by performing a straightforward calculation based on its revenues. The profit margin is derived by deducting total expenses from total sales and then dividing the result by the company’s total sales. This calculation includes depreciation, taxes, and interest expenses but excludes common stock dividends. Similarly, a company’s net profit margin is determined by subtracting total expenses from total revenue and dividing the outcome by total revenue, providing valuable insight into the company’s ability to convert revenue into profit for shareholders.