What is margin in accounting?
Margin refers to profit expressed as a percentage of revenue. It measures how much of each pound earned remains as profit after costs are deducted.
What types of margin exist?
The main types include:
• Gross margin
• Operating margin
• Net profit margin
Each reflects profitability at different stages of the income statement.
Why is margin important?
Margin helps assess efficiency and pricing strategy. Higher margins indicate better cost control and stronger profitability.
How is margin calculated?
Margin is calculated by dividing profit by revenue and multiplying by 100. The specific profit figure used depends on the margin type.
What does a declining margin indicate?
Declining margins may indicate rising costs, pricing pressure, or inefficiencies in operations.