Profit margin is a valuable indicator of an organization's operating performance if it is defined appropriately. Profit margin is the ratio of an organization's net income to its net sales.
The ratio of profit to sales is represented by profit margin. It is determined by dividing the Net Profit by the Net Sales for the relevant Time Period. It is net sales a helpful indicator of how well a business is performing, and it is also Profit margin known as return on sales.
One of the frequently employed profitability statistics to determine how profitable a firm or a particular business activity is is profit margin. It shows net sales what portion of sales resulted in earnings. Simply put, the percentage value shows how much profit the company made for each dollar of sales—in Profit margin cents. For instance, if a company announces that it had a 35% profit margin during the most recent quarter, it earned a profit.
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