How is the profit margin on an item defined?

The profit margin on an item is defined as the price of the unit minus the unit cost of goods sold. This calculation provides the gross profit, which represents the profit made from selling the product before accounting for other expenses such as operating costs or taxes. By subtracting the cost of goods sold from the selling price, a business can determine how much money it retains from each sale, which is essential for assessing profitability and making informed pricing decisions.

Understanding this concept is crucial for micro-entrepreneurs as it allows them to analyze their pricing strategies, manage costs effectively, and ultimately drive the financial success of their business.