Both average profit and profit margin show the percentage of profit that a company can expect to receive from $1 worth of sales. It is calculated by dividing the profits by the sales figure,
If sales are $10 and profits are $3, the profit margin would be:
= 3/10
= 30%
This means that for every $1 of sales, there is $0.30 in profit. This method shows us whether the total profit will be negative or positive by showing us individual product profit.
