Margin is the difference in the value of the goods at the exchange trading between the price indicated in the newsletter and the purchase price. In other words, this is the profit that firms and companies receive in the course of trading on goods of a certain category. This concept may refer, in addition to operations on the exchange, to operations in the trading, banking and insurance sectors. Only in this case, margin is the difference in the price of goods, interest rates, currency and the rate of securities in a specific period of time.
Margin in this case acts as a specific premium for market participants to receive additional income.
The concept of "profit margin" refers to relative income, which is calculated as a percentage of sales or capital. Using this term, one can judge the effectiveness of capital investments and other assets. A kind of business profitability.
Depending on the sphere used, a different margin is obtained. These are credit, banking, interest, guarantee and supported.
In this case, credit involves calculating the difference in the price of the goods, which is fixed in the corresponding loan agreement, and the loan issued for the purchase of this product.
Guaranteed margin is the difference between the collateral and the value of the loan body.
Supported margin is the minimum amount in the buyer's special account until the transaction is completed.
Net interest margin (or banking) is one of the key indicators of banking activity. This coefficient reflects the effectiveness of active operations conducted by the bank. It is calculated by the ratio of the difference between commission (interest) income and commission (interest) expense to bank assets.
It should be noted that the calculation of the latter type of margin is carried out in accordance with the size of the total banking assets or assets that bring him income. Many market participants calculate this indicator based on the size of the assets by which income is generated.
When marketing professionals and economists talk about margin, you need to remember the rules for calculating it. This calculation is carried out as finding the difference between the profitability coefficient and the profit itself per unit of product itself upon sale. Such a difference can be easily agreed upon, so it is important that managers can easily switch from one coefficient to another.
So, the margin ratio is calculated as the ratio of profit per unit of production to the selling price of this unit.
Managers also need to have knowledge of the margin when making any decisions in the marketing field. Margin is a key factor in the cost-effectiveness of marketing services, pricing, revenue forecasting and customer profitability analysis.
The use of these indicators helps to quickly solve certain problems. An example is the determination of the size of profit in the presence of different volumes of output. And using the value of marginal income, it becomes possible to see the contribution of a business entity in covering fixed costs and making a certain profit.
