What does 'Margin' measure in a business context?

The concept of 'Margin' in a business context typically refers to the relationship between profits and revenue. Specifically, it measures how much of each dollar of revenue is retained as profit. This is fundamentally encapsulated in the definition of earnings per dollar of revenue. It indicates the efficiency of a company in converting sales into actual profits, reflecting the overall profitability of the business.

When margin is expressed as a percentage, it shows how much profit a company makes for every dollar of sales. This metric is crucial for assessing a company's financial health, performance, and ability to sustain operations while generating profit. Investors and management often focus on improving margins as a key strategy to enhance profitability. This makes the understanding of 'Earnings per dollar of revenue' a central aspect of business analysis and decision-making.