Several different quantitative measures are used to compute the gains (or losses) a business generates, which make it easier to assess the performance of a business over different time periods, or compare it against competitors. While proprietary businesses, like local shops, may compute profit margins at their own desired frequency (like weekly or fortnightly), large businesses including listed companies are required to report it in accordance with the standard reporting timeframes (like quarterly or annually).Businesses which may be running on loaned money may be required to compute and report it to the lender (like a bank) on a monthly basis as a part of standard procedures.
That can be achieved when Expenses are low, and Net Sales are high.
Done on a per-product basis, gross margin is most useful for a company analyzing its product suite (though this data isn’t shared with the public), but aggregate gross margin does show a company’s rawest profitability picture.
As a formula: Operating Profit Margin (or just operating margin): By subtracting selling, general and administrative, or operating expenses, from a company's gross profit number, we get operating profit margin, also known as earnings before interest and taxes, or EBIT.
Based on the above scenarios, it can be generalized that the profit margin can be improved by increasing sales and reducing costs.
Theoretically, higher sales can be achieved by either increasing the prices or increasing the volume of units sold or both.
Practically, a price rise is possible only to the extent of not losing the competitive edge in the marketplace, while sale volumes remain dependent on market dynamics like overall demand, percentage of market share commanded by the business, and competitors’ existing position and future moves.