A business is always concerned with their economic profit margins. The reality is that if a firm does not have positive economic profits, then they will eventually go out of business.
The question that many ask themselves when thinking about this issue is “how do you calculate your profit margin?” Let’s take a look at the steps to determine this!
Economic Profit Margins, Profit Margin, Business There are a few steps to determine the profit margin of your business. We will walk through them below:
Calculate your total revenue minus any expenses, and then divide that number by your total sales volume or units sold. This is what we call gross profit margins.
For example – if you had $80 in revenue for this time frame and $60 in expenses, calculating it would be as follows: ($80-$ 60) / (100). The answer would come out to 0.75 which means 75% of all revenues were left over after paying costs.
That’s pretty good! So how do you calculate economic profits? It may seem like an easy question with such a simple calculation method .. but let’s take it one