Profit margin is the ratio of net income to revenue. It is calculated by dividing net income by revenue.
For example, if your company earns $100,000 in revenue and has $50,000 in net income, your profit margin is 50%.
Profit margin is a very important metric because it tells you how much money your company is making on each dollar of revenue. Profit margin is also a very important metric for investors, because it shows how much money your company is making on each dollar of investment.
For example, if your company has a profit margin of 50%, and you have $1 million in revenue, your company is making $500,000 in profit. If you have $10 million in revenue, your company is making $5 million in profit.
It can be difficult to calculate Profit Margin directly inside of Xero; that's where Causal comes in.
Causal is a modelling tool which lets you build models on top of your Xero data. You simply connect Causal to your Xero account, and then you can build formulae in Causal to calculate your Profit Margin.
Causal lets you build models effortlessly and share them with interactive, visual dashboards that everyone will understand.
In Causal, you build your models out of variables, which you can then link together in simple plain-English formulae to calculate metrics like Profit Margin. This makes your models easy to understand and quick to build, so you can spend minutes, not days, on your models.
When you're done, you can share the link to your model with stakeholders. They'll be able to view your model's outputs in a visual dashboard, rather than a jumble of tabs and complex formulae. The dashboards are interactive, letting viewers tweak your assumptions to see how they affect the model's outputs.
Causal lets you add visuals in a single click, letting you plot out graphs and distributions for metrics like Profit Margin.