Profit margin is a financial ratio that measures a company's profitability by dividing its net earnings by its equity. It is an important indicator of a company's financial health and can help investors evaluate the potential return on their investment. A higher profit margin indicates that a company is generating more profit per dollar of equity, while a lower profit margin may suggest inefficiency or higher operating costs. As a knowledgeable professor, I encourage you to pay close attention to this ratio when analyzing a company's financial statements.
