Oct 31, 2025

Profit Margin

• Profit margin shows what percent of sales turns into profit after all costs are paid.

• Formula: Profit Margin = (Revenue/Net Profit) ​× 100

How do I remember it?

• Think of "margin" as the slice left for you after paying everyone else.

• So: 

Profit Margin = The “leftover slice” of your sales pie.

Real world example

• You run a small boba stall.

Daily sales:

You sell 100 cups at $4 each →

Revenue = 100 × $4 = $400

Daily costs:

Tea, milk, tapioca pearls, sugar, cups = $120

Staff wages = $80

Rent & utilities = $50

Miscellaneous (straws, napkins, cleaning) = $20

• Total Costs = $120 + 80 + 50 + 20 = $270

Your profit margin is 32.5%! Meaning for every $1 earned from selling boba, you keep $0.325 as profit and the rest goes to ingredients, staff, and rent.