The margin is a concept which designates a difference between the price of goods and its actual cost, it is expressed in absolute values. Also, those who wants to know what is a margin need to know that it is designation of the size of the necessary advance payment at trade at the exchange and also a difference between rates on loans and % in rates in banking.
The margin is applied in exchange, trade, bank and insurance business. With its help it is possible to designate a difference between the prices of goods.
Besides the margin is the key which provides a possibility of receiving the credit with the money or goods used at marginal trade.
Types of a margin
- First of all, it should be noted an initial margin. It means that with the minimum quantity of means on the account of the trader, it will manage to open a position at the broker.
- One more look is the necessary margin representing quantity of the finance on the account allowing not only to open positions, but also to support them opened throughout certain time.
- Among types of a margin there is also a variation margin representing a difference between the price at which the position, and the cost of a market asset observed during this period was open.
- It should be noted also such look as a free margin which represents finance on the account of the trader which is not connected by any obligations. That is it is the money which is not used by the trader as a necessary or initial margin.
- One more type of a margin is the hedzhing necessary for opening and maintenance of couple of blocked positions with use of one tool.
- The question that such bek margin interests some. It should be noted that it is based on receiving additional profit backdating. This most additional income is provided in the form of bonuses, discounts and other preferences which are provided producers and suppliers.
How to consider a margin?
It is known that any trading company exists at the expense of the margin necessary for receiving profit and a covering of expenses. For obtaining the selling price it is necessary to add a margin to prime cost.
As for in what the margin differs from a margin and why it is necessary if it is known that the margin is a difference between the prime cost and the selling price. We receive a formula: margin = margin.
And the difference is that when calculating indicators the absolute percentage expression turns out.
So, to calculate a margin it is necessary to take away the prime cost or the selling price from the selling price to increase by 100.
To calculate a margin it is necessary to take away the selling prices the prime cost or prime cost to increase by 100.
Thus, it turns out that in percentage expression the margin exceeds a margin, and in digital – the margin and a margin are equal.
Profitability
Sometimes there is a question in what a difference of a margin and profitability. The answer such is that the margin is a margin, and profitability calculates by such formula:
The selling price – Prime cost – Expenses
Profitability of sales is one more indicator applied in the analysis of efficiency of commodity categories.
When the new products are entered into the range, the company should define optimum level of a trade margin on the goods corresponding to the desirable level of a margin.
After that the company begins to be engaged in development of planned targets on sales for a certain time. And further by means of two types of the analysis there is a control over the planned level of a margin. The operational analysis and monthly is carried out.
By means of a margin it is very convenient to trading companies to use the formulas allowing to calculate any given indicator.