Businesses use simple math to figure out how much money they make compared to what they spend. This helps them understand their profit margins.

The profit margin can be calculated using this formula:

Profit Margin = (Revenue - Cost) ÷ Revenue × 100%

Here’s what the terms mean:

1. Revenue: This is the total money a business makes from selling its products. For example, if a company earns $R$ from sales, that’s its revenue.

2. Cost: This is all the money spent to produce those products. We call this $C$.

Let’s look at an example:

If a company has revenue of $2000 and costs of$1500, we can find the profit margin like this:

Profit Margin = (2000 - 1500) ÷ 2000 × 100% = 25%

This means the company keeps 25% of its revenue as profit after covering its costs.

Using these simple math equations helps businesses change their plans when prices and costs change. It allows them to make better decisions!