Profit Maximization Challenge
In this challenge you will have to analyze some business information, and see which product is most profitable.
Furst we have to understand the concept of Profit Margins
What is a Profit Margin?
A profit margin is a measure of profitability that indicates how much of a company's revenue is converted into profit. It is expressed as a percentage and calculated by dividing the profit by the revenue and multiplying by 100.
How to Calculate Profit Margin
1. Revenue: The total amount of money a company earns from its products or services.
2. Profit: The amount of money that remains after subtracting all the costs and expenses
from the revenue.
The formula to calculate the profit margin is:
Profit Margin = (Profit / Revenue) × 100
Example
If a company sells a product for $100 (revenue) and the profit after all costs is $20, the profit margin would be:
Profit Margin = (20 / 100) × 100 = 20%
This means that for every dollar earned, the company makes 20 cents in profit.
Understanding profit margins helps businesses evaluate their profitability and make informed financial decisions.