How to Figure Sales Profit Margins
Sales profit margins measure how much of every dollar of sales the company keeps as profit after paying for the cost of the good sold. Higher sales profit margins mean a larger percentage of each dollar of sales remains in the company coffers. It also usually represents a company running very efficiently because it minimizes costs to get the product to market. To find the sales profit margin you need to know the cost of the goods sold.
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Instructions
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Find the company's total sales and costs of goods sold in the company's annual report. Each publicly traded company must release an annual report, usually available on the company's website.
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Calculate the profit of the company by subtracting the cost of goods sold from the company's total sales. For example, if the company has $8.9 million in sales but the goods cost $6.6 million, subtract $6.6 million from $8.9 million to get $2.3 million in profits.
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Divide the profits by the total sales to find the sales profit margins. In this example, divide $2.3 million by $8.9 million to get a sales profit margin of 0.2584.
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