Profit margin is a measure of profitability. It is calculated using a formula and written as a percentage or a number. It can also be called Net Profit Ratio. Profit margin = Net income / Revenue = Net Profit / Sales Revenue Mostly used for internal comparison. It is difficult to compare accurately the net profit ratio for different entities. Individual business' operating and financing arrangements vary so much that entities are bound to have different levels of expenditure, that comparison of one with another can have little meaning.