profit margin: meaning, definition, pronunciation and examples
B2Formal/Business
Quick answer
What does “profit margin” mean?
The difference between the cost of producing or acquiring something and the price at which it is sold, expressed as a percentage of the selling price.
Audio
Pronunciation
Definition
Meaning and Definition
The difference between the cost of producing or acquiring something and the price at which it is sold, expressed as a percentage of the selling price.
A key financial metric used to assess a company's profitability, operational efficiency, and pricing strategy. It indicates how much profit is made per unit of revenue.
Dialectal Variation
British vs American Usage
Differences
No significant lexical differences. Spelling of related words may differ (e.g., 'analyse/analyze', 'labour/labor').
Connotations
Identical in both varieties. Carries strong associations with business performance, financial health, and commercial success.
Frequency
Equally common in both UK and US business, finance, and economic contexts.
Grammar
How to Use “profit margin” in a Sentence
[Company/Product] has a [adjective] profit margin.The profit margin on [product/service] is [percentage].To increase/improve the profit margin.Profit margins are under pressure from [cause].Vocabulary
Collocations
Examples
Examples of “profit margin” in a Sentence
verb
British English
- The company aims to profit-margin its new line aggressively.
- They are trying to profit-margin the service for sustainability.
American English
- The firm needs to profit-margin its products more effectively.
- We can profit-margin this project by reducing overhead.
adverb
British English
- The product was priced profit-margin consciously.
- They operated very profit-margin narrowly.
American English
- The division was run profit-margin efficiently.
- She manages the budget profit-margin wisely.
adjective
British English
- The profit-margin analysis revealed worrying trends.
- They conducted a profit-margin review quarterly.
American English
- Profit-margin considerations are key to our pricing.
- The profit-margin data was presented to the board.
Usage
Meaning in Context
Business
Central term in financial reports, investor meetings, and strategy discussions. Example: 'We need to defend our profit margin against rising costs.'
Academic
Used in economics, finance, and business studies papers to analyse corporate performance and market efficiency.
Everyday
Used when discussing prices, value, or the cost of running a business. Example: 'Small shops often have a very narrow profit margin.'
Technical
Precise calculation: (Revenue - Cost) / Revenue × 100%. Specific types: gross, net, operating, pre-tax.
Watch out
Common Mistakes When Using “profit margin”
- Using it as an uncountable noun (e.g., 'We need more profit margin').
- Confusing 'profit margin' with 'profit' alone (margin is a ratio, profit is an absolute amount).
- Misspelling as 'profit margine'.
FAQ
Frequently Asked Questions
No. Profit is an absolute amount of money earned. Profit margin is a percentage that shows profitability relative to revenue.
It varies greatly by industry. A 'good' margin is one that is sustainable, covers costs, allows for investment, and is competitive within its sector.
It is primarily a business/finance term. Metaphorical use is rare but possible (e.g., 'the emotional profit margin of the relationship was low').
Gross profit margin considers revenue minus cost of goods sold. Net profit margin considers all expenses, including taxes, interest, and overheads, giving the final profitability percentage.
The difference between the cost of producing or acquiring something and the price at which it is sold, expressed as a percentage of the selling price.
Profit margin is usually formal/business in register.
Profit margin: in British English it is pronounced /ˈprɒf.ɪt ˌmɑː.dʒɪn/, and in American English it is pronounced /ˈprɑː.fɪt ˌmɑːr.dʒɪn/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “To squeeze profit margins”
- “To live on slim margins”
- “The margin for error”
Learning
Memory Aids
Mnemonic
Imagine a MARGIN on a page. The PROFIT MARGIN is the 'space' between cost and price where profit lives. A wider margin = more profit.
Conceptual Metaphor
PROFIT IS A PHYSICAL SPACE/GAP (between cost and price). BUSINESS IS A JOURNEY (margins can be roads/paths).
Practice
Quiz
What does a 'narrow profit margin' most likely indicate?