Definition: A ratio of profitability calculated as earnings divided by revenues. It measures how much out of every dollar of sales a retail business actually keeps in earnings.
Examples: The Acme Company produces widgets that sell for $50 each. It costs Acme $10 to produce the widget and it also pays an additional $5 in packaging. That makes the company's net income $35 per widget (50 - (10 + 5)) and its revenue $50. The profit margin would be (35 / 40) or 70%.
