Sales Margin Analysis

by Marquis Codjia; Updated September 26, 2017
Sales margin analysis helps a company measure profit levels.

Sales margin analysis allows a company's senior management to measure progress in sales and marketing efforts. Financial analysts and the firm's sales force evaluate sales levels at the end of each month.

Definition

Revenue is income that a company generates by selling goods--finished products or raw materials--or providing services. Gross margin is the total revenue minus the cost of goods or services divided by total revenue. Net margin is the total revenue minus expenses divided by total revenue.

Significance

Sales margin analysis is a key business decision-making factor because it indicates a company's profit levels. This analysis also helps an investor gauge a firm's competitive standing and its ability to generate good returns for investors. An example investor return indicator is profit margin, or net income divided by total sales.

Financial Reporting

A company reports sales margins in the statement of income. This is also a statement of profit and loss, or P&L. In the P&L, a firm indicates sales, expenses and the net income for the month or quarter.

About the Author

Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.

Photo Credits