How is interest margin calculated? How to calculate margin? Let's explain it in our fingers. Basic calculation formulas

Each company evaluates the results of its financial activities. During this analysis, various economic tools are used. You can evaluate the company's performance using an indicator such as margin. Using this indicator allows you to learn about the problems that impede business development and identify the strengths of the created project. This parameter can be used not only to analyze a specific enterprise, but also a separate market segment. In this article, we propose to consider the question of how to calculate margin.

What is margin: the essence of the concept

The exact meaning of the concept in question depends on the scope of its use . In the case of trade, this term is used to determine the value of the trade markup. The trade markup is a certain amount cash, which are added to the cost of products. Setting a trade margin allows entrepreneurs to formulate the final price of products and make a profit due to the discrepancy between the total revenue and expenses of the company . In the microeconomic sphere, margin is considered as one of the unique types of profit. This indicator shows the relationship between revenue and production costs. Margin can be presented in the form of proportions between the final price of products and the purchase price of the product.

In addition, the term “marginal income” is often used in the world of economics. In order to determine the amount of this type of profit, it is necessary to subtract all variable costs from the total profit. Drawing up such calculations allows you to find out about the share of variable costs in the final amount of income.

Quite interesting is the fact that the financial meaning of this term is somewhat different from its economic meaning. In this case, this indicator is used to determine the ratio of interest rates to current exchange rates. In some cases, the last parameter is replaced by the course securities. Banking institutions use separate species of this indicator. In this case, the indicator under consideration is the difference between interest on issued loans and the amount of deposit payments. It is important to note that in the banking sector the value of this indicator is expressed in monetary equivalent. For other areas of business, it is more appropriate to use a percentage ratio.

The indicator in question is often used in stock exchange. In this industry, the term margin is used to refer to the deposit paid as an advance payment for a marketable product or service. It is important to note that the size of such a markup cannot be more than thirty percent of the total transaction value. This factor is a specific feature of relationships in the securities market. You should also pay attention to the fact that this term is often used to refer to the amount of the advance payment listed when executing a transaction to purchase futures.

Quite often, economic experts use the term “gross margin.” This ratio is used to display the ratio of total revenue to production costs, which are variable or general in nature. Such calculations are made in order to determine the profitability of the project, taking into account the cost of production of marketable products. In order to determine the amount of revenue, it is necessary to multiply the cost of a single product by the total number of assets sold. When calculating the total cost, parameters such as the cost of electricity, inventories, the amount of depreciation and the amount of wage payments are taken into account. The totality of the above costs is the cost of the manufactured product.

The cost of goods includes variable and fixed production costs. The item of fixed costs includes all expenses, the value of which does not depend on the level of production capacity. This item contains depreciation deductions, administrative salaries and other expenses. Variable costs are a set of costs whose value changes along with changes in production volumes. This category includes expenses for the purchase of consumables, household equipment and wages for workers involved in the production process.

What is the difference between margin and markup

The marginality ratio is the ratio between the market value of a product and the amount of profit received through its sale. In order to calculate the value of this indicator, it is necessary to subtract all associated costs from the company's main income. It is important to note that the final indicator is expressed as a percentage. However, the peculiarities of the calculation process itself prevent this coefficient from growing to one hundred percent.

We have already said above that the indicator under consideration is a kind of variant of the commodity margin. The commodity markup itself is the difference between the market price of the product and the cost of manufacturing the product. A commodity markup is established in order to cover all costs associated with the production, transportation, storage and sale of goods. The value of this indicator is calculated based on current market conditions. There are several different administrative methods used to regulate the value of trade margins.

In order to understand the difference between markup on products and margin, it is necessary to consider a simple practical example. Let's imagine a market where goods are sold at a cost of one thousand rubles. The market price of this product is one and a half thousand rubles. Having received all the initial data, you should proceed to the calculations:

1. R margin calculation- “(1,500 – 1,000) / 1,500 = 0.33 (33%).”
2. Calculation of markup -“(1,500 – 1,000) / 1,000 = 0.5 (50%).”

Based on the results of the above example, we can conclude that the markup is a certain amount added to the original cost of the product. Margin is the amount of cash a company will have left after all production costs have been subtracted. It should be noted that, unlike the margin, the value of the product margin can be more than one hundred percent. In addition, these indicators differ from each other in their essence.

When calculating these indicators, different economic formulas are used. The margin calculation is based on the company's income. The amount of the markup is based on the original cost of the product. It is important to note that an increase in the trading markup leads to an increase in the margin ratio. However, the volume of the second indicator is always less than the value of the product margin.

Types of Margin

When considering the question of how to calculate margin as a percentage, it should be noted that the procedure for making calculations depends on the type of indicator used. Today there are several various types this coefficient, differing in the scope of application.

In production

In the manufacturing industry, margin is viewed as the difference between market value product and the price of its production. When assessing the performance of a particular organization's economic activities, the gross form of this indicator is taken into account. Using this coefficient allows you to determine the impact of margin on net profit volumes.

Majority large companies use the profit received in various investment projects. Such a project could be the expansion of fixed assets. The use of such a strategy contributes to the further growth of the organization’s income and its development.

In banking

A careful assessment of the work of credit institutions reveals that such organizations use four different forms of the indicator in question in their operations. The choice of a specific form is made based on the source of profit. One of the most simple types margin is the ratio of interest payments on loans and deposits. This indicator is used by many banking institutions. In the lending industry, a different calculation method is used. In this case, the difference between the amount of funds specified in the contract and the amount that was issued to the borrower is taken into account. In addition, there is a guarantee form of margin. This indicator is used when calculating the difference between the amount of the collateral amount and the size of the issued loan.

The performance of a financial institution is determined based on an indicator such as the net margin ratio. This indicator is calculated taking into account percentage expression. In order to calculate this coefficient, you need to perform two simple steps. First of all, you need to calculate the proportions between income and business costs. The result obtained is divided into assets owned by the organization. The formula for calculating the margin, which is in pure interest form, is as follows: “(Commission income - commission costs) / Asset value.” It is important to highlight the fact that when making calculations, you can use not only all assets, but also only those resources that generate income.

On the stock exchange

In this line of business, a variation form of the marginality coefficient is used. A specific feature of this indicator is its instability. This parameter can have not only a positive, but also a negative essence. The value of this coefficient is equal to the volume of collateral, which is one of the mandatory requirements when applying for a commodity or financial loan. Such loans are used when concluding transactions of a speculative nature. In order to calculate the margin, it is necessary to determine the level of the ratio of the collateral to the value of the open transaction.

This parameter reflects the total amount of financial resources used in a particular transaction. These resources can be used to fulfill the trader's needs. It should be noted that in the case of closed orders, valuable objects are not taken into account. In this case, the amount of funds is expressed in the form of a margin, which has a free form. This financial instrument is used by exchange participants to open new transactions.

Formula for calculating margin

Many experts recommend making such calculations in special computer applications. One such application is Microsoft Excel. Using this program allows you not only to make calculations, but also to draw various charts and graphs. When making calculations, it is necessary to use parameters expressed in the form of national currency. However, the calculation result itself must have a percentage expression.

Compiling such calculations allows you to determine how successful the organization was in a particular period.

The marginality formula is as follows: “(Gross revenue - costs) / 100%”. In such calculations, you can use the gross revenue of the entire company or one of the departments. Total costs include production costs, rental payments, taxes and personnel wages.

This formula is entered into a computer application. Instead of the parameters indicated above, individual cells are indicated. This approach allows you to automate the calculation process. The information obtained is transmitted to analysts, who compare the calculated values ​​with the results of previous periods. This approach allows us to assess the nature of the enterprise’s development and its financial position. The frequency of these events depends on the size of the business.

It is important to note that the above formula can be used to make various calculations. When assessing the effectiveness of sales, instead of the total costs of the enterprise, data on the cost of production, rental of warehouse space and the amount of transportation costs are used. In the case of production, this parameter is replaced by the cost of raw materials and consumables.

The percentage ratio of all parameters allows you to calculate the final value of the marginality coefficient. Experts must assess profitability by taking into account the purchase of individual quantities of raw materials. The operating margin formula is often used when developing a strategy for developing new business areas. Drawing up such calculations allows you to make a forecast of the effectiveness of developing a new market.

In order to calculate the gross margin, it is necessary to subtract the full cost of marketable products from net revenue. This method allows you to determine the amount of gross marginal income. In order to find out the percentage margin, it is necessary to divide the amount of revenue received by the total costs of producing products. Net revenue is defined as the unit cost of the product multiplied by the total number of products sold. The total cost of production is calculated based on the amount of fixed and variable costs.

Compiling such calculations allows you to determine the value of the coefficient under consideration. This indicator is equal to the ratio of margin and net revenue. Compiling such calculations allows you to determine the size of the margin as part of the company’s total income. In the manufacturing sector normative value This coefficient is considered to be a result equal to twenty percent. Calculation of the marginal income ratio allows you to determine the level of profitability of sales and the economic efficiency of the enterprise.

Why is margin calculated as a percentage?

Many experts recommend similar assessment efficiency of economic activities at the end of each reporting period. This approach to analytics allows you to find out what results the decisions made by the company's management brought. Having up-to-date information allows you to do the following:

1. Analyze the success of the development strategy chosen by the company's management.
2. Gain full control over recurring costs.
3. Identify the critical level of operating costs.
4. Calculate the break-even point in new areas of activity.

Based on the above, we can conclude that this indicator can be used both when assessing the entire company and when analyzing the work of individual departments.

The client may also sell borrowed securities. In this case, the debt will have to be repaid with the same securities, but their purchase is made a little later. Each broker gives its investors the right to make margin transactions independently. At any time, he may refuse to provide such a service. Benefits of Margin Trading By participating in margin trading, investors receive a number of benefits:

• The ability to trade on financial markets without having large enough amounts in your account. This makes margin trading a highly profitable business. However, when participating in operations, one should not forget that the level of risk is also not small.
• The opportunity to receive additional income when the market value of shares decreases (in cases where the client borrows securities from a broker).

Margin calculation formula

Economic terms are often ambiguous and confusing. The meaning contained in them is intuitive, but rarely does anyone succeed in explaining it in publicly accessible words, without prior preparation. But there are exceptions to this rule. It happens that a term is familiar, but upon in-depth study it becomes clear that absolutely all its meanings are known only to a narrow circle of professionals.

Attention

Everyone has heard it, but few people know it. Let’s take the term “margin” as an example. The word is simple and, one might say, ordinary. Very often it is present in the speech of people who are far from economics or stock trading. Most believe that margin is the difference between any similar indicators.

How to calculate margin and markup in excel

Gross margin in Russia and Europe The concept of gross margin in Russia refers to the profit earned by an organization from the sale of goods and the variable costs of its production, maintenance, sales and storage. There is also a formula to calculate gross margin. It looks like this: BP – Zper = gross margin Where:

• BP - the profit that the organization receives from the sale of goods;
• Zper. – costs of production, maintenance, storage, sales and delivery of goods;

This indicator is the main state of the enterprise at the time of calculation. The amount invested by the organization in production, on the so-called variable costs, shows marginal gross income.
Gross margin, or margin in other words, in Europe, is a percentage of the total income of an enterprise from the sale of goods after paying all necessary expenses. Gross margin calculations in Europe are calculated as percentages.

Margin - calculation formula

GP = TC / TR or variable costs to revenue: CM = VC / TR Margin in various fields As we already mentioned, the concept of “margin” is used in many areas, and this may be why it can be difficult for an outsider to understand what it is. Let's take a closer look at where it is used and what definitions it gives. In economics, Economists define it as the difference between the price of a product and its cost.

Important

That is, this is actually its main definition. Important! In Europe, economists explain this concept as the percentage rate of the ratio of profit to product sales at the selling price and use it to understand whether the company’s activities are effective. In general, when analyzing the results of a company’s work, the gross variety is most used, because it is it that has an impact on net profit, which is used for the further development of the enterprise by increasing fixed capital.

How to calculate margin

After collecting reporting data, the company received the following indicators:

1. Sales volume = 1000
2. Markup = 60%
3. Based on the data obtained, we calculate the cost (1000 - x) / x = 60%

From here x = 1000 / (1 + 60%) = 625 We calculate the margin:

• 1000 — 625 = 375
• 375 / 1000 * 100 = 37,5%

From this example follows the algorithm for calculating the margin formula for Excel: How to calculate the markup as a percentage if we know the margin? Sales reports for the previous period showed the following indicators:

1. Sales volume = 1000
2. Margin = 37.5%
3. Based on the data obtained, we calculate the cost (1000 - x) / 1000 = 37.5%

From here x = 625 We calculate the markup:

• 1000 — 625 = 375
• 375 / 625 * 100 = 60%

An example of an algorithm for calculating a markup for Excel: Download an example of a calculation in Excel Note.

What is margin

Therefore, it is clear that the markup is an addition to the cost of production, and the margin does not take this cost into account during calculation.

• To make the difference between margin and markup more clear, let’s break it down into several points:
• Different difference. When calculating the markup, they take the difference between the cost of goods and the purchase price, and when calculating the margin, they take the difference between the company’s revenue after sales and the cost of goods.
• Maximum volume. The markup has almost no restrictions, and it can be at least 100, at least 300 percent, but the margin cannot reach such figures.
• Basis of calculation. When calculating the margin, the company's income is taken as the base, and when calculating the markup, the cost is taken.
• Correspondence. Both quantities are always directly proportional to each other.

How margin is calculated: differences between markup and margin

Info

Please note that the markup can be as high as 20,000%, and the margin level can never exceed 99.9%. Otherwise, the cost will be = 0 rub. All relative (percentage) financial indicators allow you to display their dynamic changes. Thus, changes in indicators in specific periods of time are monitored.

They are proportional: the higher the markup, the greater the margin and profit. This gives us the opportunity to calculate the values ​​of one indicator if we have the values ​​of the second. For example, markup indicators allow you to predict real profit (margin).

And vice versa. If the goal is to reach a certain profit, you need to figure out what markup to set that will lead to the desired result.

Lakoff / calculation of markups and margins

The only thing is that the second indicator cannot exceed the first. Margin and markup are quite common terms used not only by specialists, but also ordinary people V everyday life, and now you know what their main differences are. Formula for calculating margin Basic concepts: GP (grossprofit) - gross margin. Reflects the difference between revenue and total costs. CM (contribution margin) - marginal income (marginal profit).

The difference between revenue from product sales and variable costs TR (totalrevenue) – revenue. Income, the product of unit price and production and sales volume. TC (totalcost) - total costs. Cost price, consisting of all costing items: materials, electricity, wages, depreciation, etc. They are divided into two types of costs – fixed and variable. FC (fixed cost) - fixed costs.
Markup or margin? What's the difference? As you know, any trading company lives off the markup, which is necessary to cover costs and make a profit: Cost + markup = selling price What is margin, why is it needed and how does it differ from markup, if it is known that margin is the difference between selling price and cost? It turns out that this is the same amount: Markup = margin What is the difference? The difference lies in the calculation of these indicators in percentage terms (the markup refers to the cost, the margin refers to the price). Let's compare: Markup = (Sale Price - Cost) / Cost * 100 Margin = (Sale Price - Cost) / Sales Price * 100 It turns out that in digital terms the amount of markup and margin are equal, and in percentage terms the markup is always greater than the margin. For example: Margin cannot be equal to 100% (unlike markup), because

Margin is the difference between...economic terms. how to calculate margin

It is important to note that the formula for calculating gross margin takes into account income that does not result from the sale of goods or the provision of services. Non-operating income is the result of:

• writing off debts (receivables/creditors);
• measures to organize housing and communal services;
• provision of non-industrial services.

Once you know the gross margin, you can also know the net profit. Gross margin also serves as the basis for the formation of development funds.

When talking about financial results, economists pay tribute to the profit margin, which is an indicator of the profitability of sales. Profit margin is the percentage of profit in a business's total capital or revenue. Margin in banking Analysis of the activities of banks and the sources of their profit involves the calculation of four margin options.

Let's look at each of them:

Margin calculation formula

Costs that do not change when capacity (production volume) changes, for example, depreciation, director’s salary, etc. VC (variablecost) - variable costs. Costs that increase/decrease due to changes in production volumes, for example, the earnings of key workers, raw materials, materials, etc. Gross margin reflects the difference between revenue and total costs.
The indicator is necessary for analyzing profit taking into account cost and is calculated using the formula: GP = TR - TC Similarly, the difference between revenue and variable costs will be called Marginal income and is calculated using the formula: CM = TR - VC Using only the indicator of gross margin (marginal income), it is impossible assess the overall financial condition of the enterprise. These indicators are usually used to calculate a number of other important indicators: contribution margin ratio and gross margin ratio.

Margin (English margin – difference, advantage) is one of the types of profit, absolute indicator functioning of the enterprise, reflecting the result of the main and additional activities.

Unlike relative indicators (for example, ), margin is necessary only for analyzing the internal situation in the organization, this indicator does not allow comparing several companies with each other. IN general view margin reflects the difference between two economic or financial measures.

What is margin

Margin in trading– this is a trade margin, a percentage added to the price to obtain the final result.

What mark-up and margin are in trading, as well as how they differ and what you should pay attention to when talking about them, is clearly explained in the video:

IN microeconomics margin(grossprofit - GP) - a type of profit that reflects difference between revenue and costs for manufactured products, work performed and services provided, or the difference between the price and the cost of a unit of goods. This type profit coincides with the indicator " profit from sales».

Also within economics of the company allocate marginal income(contribution margin - CM) is another type of profit that shows the difference between revenue and variable costs. This type of profit helps to draw conclusions about the share of variable costs in revenue.

IN financial sector under the term " margin» refers to the difference in interest rates, exchange rates and securities and interest rates. Almost all financial transactions are aimed at obtaining margin - additional profit from these differences.

For commercial banks margin– this is the difference between the interest on loans issued and deposits used. Margin and marginal income can be measured both in value terms and as a percentage (the ratio of variable costs to revenue).

On securities market under margin refers to collateral that can be left to obtain a loan, goods and other valuables. They are necessary for transactions on the securities market.

A margin loan differs from a traditional loan in that the collateral is only a portion of the loan amount or the proposed transaction amount. Typically the margin is up to 25% of the loan amount.

Margin also refers to the advance of cash provided when purchasing futures.

Gross and percentage margin

Another name for marginal income is the concept of “ gross margin"(grossprofit – GP). This indicator reflects the difference between revenue and total or variable costs. The indicator is necessary for analyzing profit taking into account cost.

Interest margin shows the ratio of total and variable costs to revenue (income). This type of profit reflects the share of costs in relation to revenue.

Revenue(TR– total revenue) – income, the product of the unit price and the volume of production and sales. Total costs (TC – totalcost) – cost price, consisting of all costing items (materials, electricity, wages, etc.).

Cost price are divided into two types of costs - fixed and variable.

TO fixed costs(FC – fixed cost) include those that do not change when capacity (production volume) changes, for example, depreciation, director’s salary, etc.

TO variable costs(VC – variable cost) include those that increase/decrease due to changes in production volumes, for example, the earnings of key workers, raw materials, materials, etc.

Margin - calculation formula

Gross Margin

GP=TR-TC or CM=TR-VC

where GP is gross margin, CM is gross marginal income.

Interest margin calculated using the following formula:

GP=TC/TR orCM=VC/TR,

where GP is interest margin, CM is interest margin income.

where TR is revenue, P is the price of a unit of production in monetary terms, Q is the number of products sold in physical terms.

TC=FC+VC, VC=TC-FC

where TC is the total cost, FC is fixed costs, VC is variable costs.

Gross margin is calculated as the difference between income and costs, percentage margin is calculated as the ratio of costs to income.

After calculating the margin value, you can find contribution margin ratio, equal to the ratio of margin to revenue:

K md =GP/TR or K md =CM/TR,

where K md is the marginal income coefficient.

This indicator K md reflects the share of margin in the total revenue of the organization, it is also called rate of marginal income.

For industrial enterprises the margin rate is 20%, for retail enterprises – 30%. In general, the marginal income coefficient is equal to profitability of sales(by margin).

Video - profitability of sales, the difference between margin and markup:

The work of a commercial company is assessed by profit. But the numerical expression poorly reflects the dynamics by month, because revenue varies depending on the season and other factors. Therefore, the marginal profit indicator is often used as a percentage. We will look at how to calculate margin in detail in this article.

Margin concept

The term comes from the English “margin” translated as difference, advantage. The basic values ​​are the cost of the product and the price for the end consumer. Marginal profit is expressed as a percentage, which reflects the dynamics of the enterprise's profitability, regardless of the size of operating costs and revenue received.

Rice. 1. A high profit margin does not always mean a high margin.

The concept of margin is applied regardless of the sphere: bank, production, provision of household services to the population. The generalized indicator, at first glance, is effective in different areas of accounting.

What types of margin are used?

Accounting for a small company where overall profit is key is one thing. Another case is when a manager needs to calculate the efficiency of different departments: purchasing, sales, production. Then we have to separate financial results and calculate the margin based on “individual” indicators.

Margin is most often divided into categories:

• gross Sometimes they say “gross margin”. Suitable for calculating the level of costs for the purchase of raw materials, sales of goods, and payment of wages;
• operating room This is the ratio of operating profit to enterprise income. It indicates the efficiency of the work (the higher the better). In practice, this figure is used when assessing intermediate results to track dynamics in production/trade;
• clean. Profit per unit of revenue. This indicator is good for departments working on planning the company's future activities. It is used in large enterprises where the cost part of the budget can vary significantly;
• interest. Used by banks and other financial institutions. There are absolute and relative indicators. The first option shows how successful the company is in the current period, the second - in comparison with previous results.

How is margin calculated?

If desired, this can be done on a calculator, but tables are more convenient, because can become an appendix to a report; they can be used to create graphs and diagrams. The initial data is taken in rubles, the result of the calculations is obtained as a percentage.

Margin formula:

M = (H – W)/H x 100%, where

M – margin (in percent); IN - gross receipts(enterprise or individual division); C – costs (product cost, rent, salaries, taxes).

Rice. 2. A similar table is compiled at the end of each reporting period

The proposed marginality formula remains unchanged regardless of the source data. For example, the sales department takes the purchase price of goods, costs for warehouse space, transport, and salaries as indicator “Z”. In production, instead of goods, raw materials and consumables used in the manufacture of products are taken into account.

The given formula is entered into an Excel table, the required columns are indicated, and the source data is entered into the corresponding columns.

Comparison of individual periods (months, quarters, years) allows you to evaluate the dynamics and determine the general trend - whether there is a decline or rise. The larger the enterprise, the more often it is recommended to make such cuts.

Rice. 3. According to this graph, it is easy to see an increase in costs and a decrease in profits

Percentages are also used to calculate coefficients. This is a comparison of profitability for purchasing individual batches of raw materials and working with suppliers. The formula for calculating margin is also in demand when creating a business plan for new directions. Thanks to the availability of figures on profit margins and cost amounts, it is easier to plan the development of the company (is there enough market potential, is it necessary to expand to other regions).

Are there differences in markup and margin calculations?

When preparing the initial data for calculating margin as a percentage, it is worth considering the difference between margin and markup. Often the second concept is used as a synonym for the term “profit”. But in practice its purpose is somewhat different.

Markup is an increase in the cost of goods/services when counterparties choose additional delivery conditions stipulated by the contract.

It turns out that the markup is only part of the margin. Most often, they resort to it if operating costs increase, new contractors have to be involved, equipment has to be purchased in order to fulfill the new terms of the contract. If you use the markup as the initial data and try to calculate the cost-effective level of costs from it, you will get an unreliable figure.

The value of margin analysis in business

Drawing up margin reports for the reporting period and comparing values ​​for different months/years plays a significant role in making management decisions. The work of a number of departments (employees) is based on this indicator. Thanks to its accurate data, the following work is carried out:

• analysis of the results of the organization’s activities;
• management of fixed costs;
• determination of the critical level of operating expenses;
• calculation of break-even level and profitability in new areas.

The indicator is useful both for the enterprise and for analyzing individual groups or names of goods, identifying profitable types of products.

The feasibility of the company's operation is assessed by economic indicators. The main criterion used to monitor activity is margin. Its regular monitoring allows you to timely identify business problems, identify its weaknesses and strengthen strong positions. The parameter is used to assess the profitability of the industry, as well as to justify important decisions. Margin is always determined by analyzing the financial condition of a business entity.

What is margin

What is margin

Margin is identified as the difference in indicators that allow one to evaluate the operating parameters of a business and its profitability. When determining it, the predominant position of one of the indicators taken into account in the analysis is taken into account. The assessment of a company's solvency is carried out by comparing two criteria classified as economic and financial categories. The varieties of the parameter are determined by the area of ​​business that is subject to efficiency analysis.

The concept of margin is used in many areas of activity. There are several types of economic indicators:

• gross;
• variational;
• net interest;
• warranty;
• credit;
• bank;
• stock exchange.

Production

Economists define margin as the difference between the price of a product and its cost. When analyzing the performance of a business entity, the gross version of the parameter is used, since it affects the net profit used for investing in order to increase fixed capital. This decision contributes to the development of the company and increases its profitability.

Banking

In the banking industry, the concept of credit margin is applicable. It is relevant when drawing up a loan agreement and is determined by the difference between the cost of financial benefits received under the agreement and the amount paid by the borrower taking into account accrued interest.

When collateral lending, the calculations take into account the guarantee margin corresponding to the difference in the value of the collateral property and the amount of the loan issued.

In the field of depositing, the concept of bank margin is relevant. It is calculated by the difference between the parameters of the credit and deposit interest rates. The indicator allows you to balance the profit received by the bank as a result of investments by adjusting the interest rate.

The main criterion for the successful functioning of a financial institution is the net interest margin. To determine it, it is necessary to divide the difference in income and expenses classified as commission by assets. The calculations may take into account all assets or only those that are currently generating income.

Read also: Internal and external combination of professions and positions

Stock exchanges

Variation margin is used in exchange activities. The parameter is variable and can have a positive or negative value. It is determined by the amount of collateral, which provides the opportunity to obtain a monetary or commodity loan to carry out financial transactions of a speculative nature during margin trading. Margin is expressed as a percentage of the collateral to the value of the open position.

The concept of marginal income

The parameter determines the amount of funds in the transaction, which can be freely disposed of due to the fact that they do not relate to the trader’s obligations. When orders are closed, valuable objects are not included in them, so the entire amount is presented as free margin. It is used by traders to open positions and is determined by the difference between funds classified as assets and collateral, which is a liability.

Margin is a key factor in pricing and assessing the effectiveness of marketing spend. It allows you to analyze the profitability of the entity and predict its overall profitability. Economic indicator is a relative value expressed in percentage measurements. It corresponds to private earnings and revenue adjusted to 100 percent.

Formula for calculating marginal income

The marginality coefficient is calculated with a focus on a unit of product that is produced and sold by the company whose effectiveness is being assessed. It is not a characteristic of the economic structure of a business entity, but it allows one to identify profitable and unprofitable types of products from the point of view of obtaining potential profits.

Example

It is a known fact that the company’s margin is 20 percent. These data indicate that every ruble of revenue contains 20 kopecks of profit. The remaining funds are classified as expenses.

Operating margin

The operating margin formula allows you to calculate a coefficient that identifies the level of profitability of the company of a business entity in the process of carrying out its operating activities in a standard mode.

To determine it, it is necessary to calculate the share of profit from sales when running a business by finding the private profit to revenue. The calculation uses the parameter of profit before taxes and interest on loans. It includes the cost of goods sold, as well as expenses classified as commercial, general and administrative.

Sales margin calculation

Margin markup

If the company's operating results are represented by an expanded product range, then it is recommended to use the marginality ratio to assess the profitability of sales. Assessing the parameters calculated for all categories of goods or services separately will allow you to determine which products generate the most income and not waste financial resources on the production of unclaimed goods. The analysis of coefficients is relevant when determining the production volumes of each product from the product range in the case of using the same technologies and using identical raw materials.