How to Calculate Profit Margin: Definition & Formula


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What are the three benefits to knowing the profit margin?

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1. What is the Profit Margin Formula?

2. If Nexis Shoe Company has a net profit margin of 60% and their competitor has a net profit margin of 40%, what hypothesis can be made?

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About This Quiz & Worksheet

This quiz and worksheet can help you quickly check your understanding of how to calculate profit margin. You will be quizzed on the profit margin formula and other economic-related principles.

Quiz & Worksheet Goals

Make sure you can address the following topics:

  • How profit margin is related to industry performance
  • Benefits to knowing the profit margin
  • What the profit margin indicates for businesses

Skills Practiced

  • Problem solving - use acquired knowledge to solve a profit margin practice problem
  • Making connections - link your understanding of profit margin and a company's performance in their particular industry
  • Information recall - access your knowledge of the profit margin formula

Additional Learning

The lesson titled How to Calculate Profit Margin: Definition & Formula covers the following objectives:

  • Define and work with cost of goods sold (COGS)
  • Determine why businesses want to find the profit margin
  • Identify parts of the profit margin formula