What is product margin?

Product margin refers to the profit margin of a specific product. It is used to determine the markup of a particular product, which can help businesses identify which of their products are bringing in the most revenue proportionally compared to their production costs (including cost of goods sold, administrative costs, and other operating expenses). 

Profit margin formula & definition

Product margin is distinct from profit margin, another key measure of a company’s financial health. Profit margin represents business profitability in terms of the percentage of sales that has generated into profits. There are four main types of profit margin: gross profit margin (also referred to as gross margin), which factors out the cost of goods sold; operating profit margin (also referred to as EBIT, or earnings before interest and taxes, margin), which factors out selling, general, and administrative expenses; pretax profit margin; and net profit margin (also referred to as net margin), which is calculated by dividing net profits by net sales.