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One may reduce/eliminate a non-profitable product line to curtail expenses, but the business will also lose out on the corresponding sales.

On the other hand, if the expenses are kept fixed at ,000 and sales improve to 0,000, profit margin rises to = 50%.

Then it pays taxes, leaving the net margin, also known as net income, which is the very bottom line.

Gross profit margin: Start with sales and take out costs directly related to creating or providing the product or service like raw materials, labor, and so on—typically bundled as "cost of goods sold,” “cost of products sold,” or “cost of sales” on the income statement—and you get gross margin.

Several different quantitative measures are used to compute the gains (or losses) a business generates, which make it easier to assess the performance of a business over different time periods, or compare it against competitors. While proprietary businesses, like local shops, may compute profit margins at their own desired frequency (like weekly or fortnightly), large businesses including listed companies are required to report it in accordance with the standard reporting timeframes (like quarterly or annually).

Businesses which may be running on loaned money may be required to compute and report it to the lender (like a bank) on a monthly basis as a part of standard procedures.

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