Why we are investing in a stock market? Most of you agree on the point, to get a high profit in comparison to other investment options. Similarly, a business sells its services or products to get a high profit.
In a simple word, Profit is an amount that left with a company after paying for its expenses. I think it is clear how important a profit is for businesses. A healthy business can also categorise by considering and comparing profit margins of different industries in the same market segment to find the high potential company which is differentiating their products and services from their rest of the competitors.
2. Operating profit margin – Operating profit is one step ahead than the gross profit as it not only considers the company’s direct costs but indirect costs, too. It states how much the company keeps revenue after paying direct costs and overhead expenses. To calculate the operating profit margin, the operating profit divided by revenue. Operating profit margins is an important indicator to calculate the company’s profitability concerning its core business.
3. Net Profit Margin – A company’s net profit is the most comprehensive measure of Profitability. Net profit is the total amount left with the company after paying all its costs and expenses. The net profit margin can calculate by dividing net profit with total revenue, Just like net profit, companies can lose money, too which is called as a net loss.