---
title: "Definition of Margins"
url: https://signalscreener.fr/definition/margins/
markdown_url: https://signalscreener.fr/definition/margins.md
description: "Margins show what percentage of revenue becomes profit at different stages."
type: glossary-definition
site: Signal Screener
language: en
keywords:
  - "Margins"
  - "Profit Margins"
translations:
  es: https://signalscreener.fr/es/definition/margins.md
  fr: https://signalscreener.fr/fr/definition/margins.md
  zh: https://signalscreener.fr/zh/definition/margins.md
---

# Profit Margins

## What is Margins?

Margins show what percentage of revenue becomes profit at different stages. Gross margin is after product costs, operating after all operations, net after everything.

## Think of it like this

Selling lemonade for $10. Ingredients cost $3 (70% gross margin). Add $4 for stand rental and labor (30% operating margin). After $1 taxes, keep $2 (20% net margin).

## Formula

```
Margin = (Revenue - Costs) / Revenue × 100
```

- **Gross Margin**: Revenue - Cost of Goods Sold
- **Operating Margin**: Operating Income / Revenue
- **Net Margin**: Net Income / Revenue

## Why it matters

- Shows operational efficiency
- Indicates pricing power
- Reveals competitive advantage
- Trends show improving/declining business

## What's a good value?

| Range | Rating | What it means |
|---|---|---|
| < 5% | Low | Razor-thin profits, high competition |
| 5-10% | Moderate | Average profitability |
| 10-20% | Good | Solid profitability |
| > 20% | Excellent | Strong pricing power |
| Net > 20% | Excellent | Highly profitable |

## Real-world example

Apple gross margin: 43% - premium pricing. Walmart net margin: 2% - volume business. Software company: 80% gross - minimal COGS. Airlines: 5% net - competitive industry.

## Things to watch out for

- Compare within same industry
- Can sacrifice margin for growth
- Temporary factors affect margins
- Different accounting methods impact

---

This is educational content, not financial advice.

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