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Business Definition for: average profit margin
average profit margin
- method of calculating the profit margin per item sold by applying an equal proportion of the total expenses of the seller against each item sold. It can be used to determine the benefit to be gained from advertising. For example, assume a $100 advertisement will generate 100 sales. Each items sells for $5 and costs $3 to produce and deliver, leaving a profit margin of $2. Since advertising will cost $1 per item sold, the average profit margin of $1 indicates that the item will be profitable after advertising expense.
- gross profit margin of a business enterprise averaged over a period of time. The gross profit margin is the annual net sales or revenues less the cost of goods sold.
Copyright c 2000, 1994, 1987 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
