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Profit margin

Profit margin

Profit margins are calculated after the sale has taken place in order to see if one actually achieved the calculated selling price.

Sale in any circumstance is like participating in an open auction. Disturbances like price wars between competitors, popularity in the market, political decisions and all sorts of different reasons might alter the final selling price of the stock kept by a company.

Profit margin is then used as a general guide line on how to calculated later selling price in realtion to initial purchase price.