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Margin Formula

Margin formulas assess revenue-cost relationship, vital for business efficiency.

Updated over 8 months ago

EBITDA Margin

The EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin ratio calculates the proportion of a company's revenue that translates into EBITDA, which reflects the operational profitability of the business, excluding certain expenses like interest, taxes, depreciation, and amortization.

This ratio provides insight into how efficiently a company generates earnings from its core operations before considering non-operational expenses. A higher EBITDA margin indicates better operational efficiency and profitability. The ratio also helps compare the company's financial performances to that of its peers irrespective of differences in capital intensity, capital structure and taxation policies.


EBIT Margin

The EBIT (Earnings Before Interest and Taxes) margin ratio calculates the proportion of a company's revenue that translates into EBIT, which represents its operating profitability before considering interest and taxes.

This ratio provides insight into how efficiently a company generates operating earnings from its core business activities. A higher EBIT margin indicates better operational efficiency and profitability. The ratio also facilitates comparison of the company's financial performance with that of its peers, independent of differences in financing structures and tax rates.


Net Income Margin

The net income margin ratio calculates the proportion of a company's revenue that translates into net income, which represents its bottom-line profitability after considering all expenses, taxes, interest, and other deductions.

This ratio provides insight into the overall profitability of the company, as it reflects the percentage of revenue that remains as profit after accounting for all expenses. A higher net income margin indicates stronger profitability and financial health.

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