How to calculate a margin?

How to calculate a margin?

Margin – the term which is used in exchange, trade and banking practice. It is used to specify a difference between the total price and unit cost. Now it is necessary to understand how to calculate a margin and what values need to be had for this purpose.

The basic concepts concerning marginality

It is possible to judge success of the company, leaning on its high margin. To make the decision in the field of marketing strategy, experts carry out the analysis of marginality. Each enterprise can have own size of a unit of production which is used when calculating a margin. For example, counting a margin in paint and varnish industry, such unit as liter is used. In banking the indicator of number of clients and accounts is applied.

Basic formula how to calculate a margin: M = OC are the joint venture,

where M – a margin or the got profit on a commodity unit,

OC – value of the price which is exposed by the producer for consumers,

The joint venture – actual product cost.

Using this formula it is possible to understand how to calculate product cost, knowing a margin. It is enough to make one mathematical operation.

The term "margin" many still call profit coefficient which is expressed as a percentage. Generally, it is possible to determine profitability of business by value of a margin. It was necessary to understand how to calculate a margin as a percentage. The formula is also simple: To = P/OTsh100%,

where To – profitability coefficient which is expressed in %,

П – the profit got after sale of a unit of production. What is OC, it was told earlier.

Many people in publications and even in a talk faced such expression what the margin can be 100 and even 150%, but whether it is possible? That to understand it rather simply once again to read definition of this term where it is told that it is an indicator of profitability of sales. Therefore it is possible to tell with confidence that the value of a margin can bring closer to 100%, but not to be more in any way.


Author: «MirrorInfo» Dream Team