Margin than different from the trading charge. Margin in the banking sector

Margin and profit what's the difference

In any business there are concepts of margin and profits. Some equates them to each other, others prove that they cannot be compared. Both indicators are strategic importance for the economic success of the enterprise or bank.

Thanks to them, the financial result of the work is estimated, the efficiency of using available resources and the overall result. With definitions of profits and margins, you can often encounter when discussing the issues of Forex, in banking business and other classes related to finance and economies. To understand which of the indicators that shows, we will analyze each of them.

What is margin?

This term came from Europe translated from the English Margin or French Marge margin means markup. Margin is found in banking and insurance business, commercial operations and operations with securities and so on. Economists call a margin difference from the company's income received and the cost of manufactured products. Often the words "margin" replace "gross profit." The principle of calculation margin is simple: cost is subtracted from the total amount. The obtained value indicates how much real money is received by the organization from the sale of products without taking into account additional costs.

The importance of margin should not be underestimated. It shows how effective one or another business is. The company's revenues are directly related to the margin and its activities are estimated.

Bank employees talk about margin when they compare the difference of loans and deposit rates. Signally speaking, if the bank wants to attract customers with high rates on deposits, he is forced to offer high loan rates.

Margin plays a large role in assessing the efficiency of the company. From its size will be directly proportional to the thorough profits. The margin underlies the formation of development funds. The percentage value of margin (or percentage) will be calculated by the cost ratio to revenue. If you calculate the gross "dirty" profit to the revenue, then it turns out an important indicator - the margin coefficient. In percentage, the profitability of sales, and this is the main indicator of the work of any organization.

If you take the concept of margin on the stock exchange, for example, forex, then it means temporary mortgage cooperation. During it, the participant receives the necessary amount for the operation. The principle of margin deals is that the participant does not have to pay for the entire cost of the contract. He enjoys the resources provided to him and a small part of his own money. As soon as the transaction closes, the received income will be on a deposit on which they were posted. If the transaction becomes unprofitable, then the loss will be covered by borrowed funds, which then still have to return.

Now the figures were the indicators of the "front margin" and "back margin", which are connected with each other. The first indicator reflects the acquisition of income from the markup, and the second - from the shares and bonuses.

Thus, these indicators are calculated during the work of any company. They have formed a separate direction of management accounting - margin analysis. Thanks to the margin, the company manipulates variable costs and costs, thereby affecting the final financial result.

What is profit?

The final goal of any business is profit. This is a positive financial result. Negative will be referred to. To see the difference margin from profits can be in the income statement (form No. 2). To make a profit, you need to clean the margin from all expenses. The calculation formula will look like this:

Profit \u003d revenue - cost-commercial costs - managerial costs-paid interest + gained interest - non-revenue costs + non-dealer income- other expenses + other income.

The resulting value is subject to taxation, after which net income is formed. Next, it goes to pay dividends, postponed to the reserve and is investing in the development of the company.

If, when calculating margin, only the cost of production (cost) is taken into account, then all types of income and expenses are involved in profit.

In the process of business, there are several types of profits, but a net profit is important for the leadership, which shows the difference between revenue and all costs. If the revenue has more nominal value and expressed in monetary terms, then all other costs include the costs of production and tax deductions, excise taxes, and so on.

Gross profit reflects the difference between the amount received and expenditures for production without taking into account taxes and other deductions. According to its calculation, it is similar to marginal profit. Unlike the gross "dirty" income, margin data takes into account variable expenses, for example, on fuel, electricity, wages, the cost of materials for production, etc. Those companies who are counting margin income, look not only on its sum, but also at speed Consume money.

What is the difference between margin?

Unlike profit, the margin takes into account only the production costs, of which only the cost of products is consumed. Profit takes into account all the costs that appear in the course of doing business. Analysis of the results shows that the profit of the company increases with the increase in the margin. The larger the margin, the higher the profit will be. In terms of profit, there is always less margin.

If the profit shows the net result of the business, the margin refers to the fundamental pricing factors, on which the profitability of marketing costs, the analysis of client flow, as well as the income forecast. In management accounting there is an important pattern that all changes that occur with the revenue are proportional to the gross margin. The margin, in turn, is proportional to the growth or decline in profits. The ratio of gross margin to profits. Economists called the effect of the operating lever. It is used to assess the effectiveness of the use of available resources and the general result.

Thus, all financial indicators are their own meaning. These calculation will be influenced by the methods of analysis and accounting rules. The correct interpretation of the dynamics of all indicators is necessary for competent business planning. And margin, and profits say a lot about the work of the organization.
Calculations of these indicators are recommended to be carried out regularly in set periods to compare the values \u200b\u200band detect patterns. Seeing this or that dynamics, the head can trace the market trends and carry out the necessary permutations and adjustments to the activities of the organization, pricing policies and other aspects affecting the success of the company. The result of all work depends on how on time and correctly will be calculated and evaluated indicators of margin and profits.

MENSBY.

4.5

Often you have to hear the term margin, but, as it turned out, not everyone who uses it correctly understands the meaning.

After the next heard "margin of 200%", etc. - We publish this article.

Today we will make the definition of what is "margin", consider how to make the calculation margin and how it differs from the markup.

Margin (profitability of sales) - This is the difference between selling price and cost price. This difference is usually expressed or as a percentage of the selling price (profitability coefficient), or in absolute values \u200b\u200bas profit per unit of products.

Margin in interest expression.

Profitability ratio (%) \u003d profit per unit of production ($) / selling price unit ($)

Profit per unit of production ($) \u003d vacation price per unit ($) - cost of products ($)

This article does not consider the value of the term "margin" for stock transactions. In this case, the margin is a guarantee that provides the opportunity to get credit or goods in temporary use.

Purpose: Determining the value of sales growth: and the management of pricing and decision-making on product promotion.

The profitability of sales ("profitability of sales" - hereinafter not to be confused with other types of profitability!) Is a key factor in a number of many other major types of calculation of commercial activities, including estimates and forecasts. All managers should know (and usually know) the approximate profitability of sales of their company. However, managers are very different in the initial parcels that they use when calculating sales profitability, and according to the methods that they analyze and transmit these important figures.

The profitability coefficient and profit per unit of products.

When they talk about margin, it is important to keep in mind the difference between the profitability coefficient and profit per unit of products during sales. This difference is easy to match, and managers should be able to switch from one to another.

What is a unit of production? Each company has its own idea of \u200b\u200bwhat is a unit of products that can vary from ton of margarine to 1 liter of cola or buckets of plaster. In many industries, they deal with numerous units of products, and calculate the margin accordingly. In the tobacco industry, such as cigarettes, sold by pieces, packs, blocks and boxes (which contain 1200 cigarettes). The banks of the margin are calculated on the basis of accounts, customers, loans, transactions, family units and branches of the bank. It is necessary to be ready to easily switch from one concept to another, since solutions can be based on any of them.
Profitability coefficient

The profitability coefficient can also be calculated using gross sales in monetary calculation and cumulative costs.

Profitability ratio (%) \u003d [Total sales in cash calculation ($) - cumulative costs] / total sales in cash calculation ($)

When calculating the profitability of sales, expressed as in percent (profitability coefficient), and in profit per unit of products, it is possible to perform a simple reconciliation, checking whether individual parts are a total amount.

For reconciliation profits per unit of production ($):

Vacation price per unit product \u003d profit per unit of goods + cost of a unit of goods.

For reconciliation of profitability coefficient ($):

Costs as a percentage of sales \u003d 100% - profitability coefficient.

Example.

One company sells fabric with power meters. Its basic costs and the selling price look as follows:

Vacation price unit products \u003d 24 US dollars for a temporon meter.

Costs per unit product \u003d 18 US dollars for a temporon meter.

Profitability coefficient (%) \u003d (24 dollars -18 dollars) / 24 dollars \u003d 6 dollars / 24 dollars \u003d 25%

Let's check the correctness of our calculations:

Vacation price unit products \u003d profit per unit of products + cost per unit of products.
24 dollars per stranded meter \u003d 6 dollars per straight meter +18 dollars per straight meter.

Similarly, you can check the calculations of the profitability coefficient:

100% - profitability coefficient for sales (%) \u003d costs as a percentage of sales.
100% - 25% \u003d 18 dollars / 24 dollars

Data sources, complexity and caution.

After you determine the units of measurement, you will need two types of source data: the cost of the product unit and the selling prices of the product unit.

Vacations can be defined before or after various price settings. Deductions, consumer discounts, payments to intermediaries and commission can be shown to the manual or as expenses, or as deductions from the selling price. Moreover, the external reporting may differ from reporting before leadership, since accounting standards may require data processing other than the practice taken within the company. The declared profitability coefficients may differ rather strongly depending on the methods of calculation. This can lead to a significant organizational confusion in such a matter of paramount importance as the definition of the actual price of the goods.

Care should be taken when calculating certain discounts and allowances (extra charges) when calculating a net price. Often there is a great freedom to choose regarding the subtraction of certain positions from the price list for calculating the net price or add them to expenses. One example is the practice of providing gift certificates in retail for those customers who bought a certain amount of goods. It is not easy to consider them in such a way as to avoid confusion at prices, marketing costs and profitability. In this regard, one important points should be noted:

1. Certain positions can be viewed or as deductions from prices, or as an extra charge to the cost, but only one thing.
2. The processing of such positions will not affect profits per unit of production, but will affect the profitability coefficient.

Margin as a share of costs.

In some industries, in particular, in retail, margin is calculated as the percentage of the costs of costs, not vacation prices. Using this technique in the previous example, the profitability coefficient on the meter of ordinary tissue could be calculated as a profit per unit of production (6 dollars), divided into the cost of the unit of products ($ 18), and it would be, therefore, 33%.

Extra charge or margin?

Although some people use the terms "margin" and "markup" or "allowance" as interchangeable concepts, it does not correspond to reality. The term "markup" usually refers to the practice of adding a certain percentage to the cost for calculating selling prices.

To better understand the difference or the ratio between margin and markup, let's count a little. For example, an outcome of 50% to variable costs of $ 10 would amount to $ 5, which would have given a retail price of $ 15. But, a margin at a position that is sold at a retail price of $ 15 and on which variable costs are spent in the amount of $ 10, would be $ 5/15 dollars or 33.3%. Those. margin - 33.3%. Is there a difference, is it not true? The following table shows some ratios between the magnitude of margin and margins.

The ratio between margin values \u200b\u200band margins.

In order not to confuse once again, we are committed to the rule that margin is the ratio of profit to the price, (that is, the percentage of profit in the price of goods), and the markup is the ratio of profit to the cost, (ie the percentage of profit at cost in cost ).

Also interesting conclusion from this rule is that the margin (profitability of sales) can only approach 100%, because the margin of 100% can only be at zero cost - which cannot be possible, and the calculation of the markup in this case is impossible. Margin 100% is impossible! The profitability of sales is 100% impossible!

One of the specific features of retailers is that prices increase in the percentage of the purchasing price of the store (variable costs to the position), but are reduced during the sales period in a percentage of the retail price.

Most managers understand that the sale with a discount of 50% means that retail prices are dropped by 50%.

Example.

The retail company selling clothing buys T-shirts at a price of 10 dollars and sells them with a 50 percent markup. 50% of the surcharge of variable costs of $ 10 leads to the formation of a retail price of 15 dollars. Unfortunately, the goods are not for sale, and the owner of the store wants to sell it at cost in order to free the place on the shelves. He carelessly tells the sellers to sell goods with a 50 percent discount. However, such a decrease in the price of 50% reduces the retail price by $ 7.50. Thus, a 50 percent mark-up, followed by a 50% markdown, leads to a loss of $ 2.50 on each item sold.

You can easily see how confusion occurs. Usually prefer to consume the term "margin" in relation to the profitability coefficient of sales. However, we recommend all managers to coordinate with your colleagues that they imply under this important term.

Companies that are engaged in trading activities exist at the expense of margin. A certain amount in rubles is added to the cost of goods or services and the resulting price of goods is obtained. But then the question arises what a margin is and is it equal to the markup? Many novice entrepreneurs often confuse these two concepts. Let's deal with ...

I am not an economist and myself I myself confused these concepts. When I was employed in sales into a large company, my future manager asked me whether there could be a margin of lack of charge and I fell into a stupor first, as I believed that this was the same. He asked me if the price of goods is 130 rubles, and the cost of 100, then how much margin and markup will be. I said that 30 and not mistaken. Then he asked me, and how much as a percentage, and then I sailed 🙂 30%, I replied, margin and extraction, embarrassed a little and already understanding that I don't know something. 30% and 23% answered. After that, I began to tighten my economic knowledge, as they are required for active growth in the field of sales and management, one negotiating skills here will no longer cost, I understood.

Margin - (from English Margin - difference, advantage) This is the difference between the selling price of the goods and its cost (procurement price + delivery costs). Also, it is called gross profit. In other words, an indicator of sales profitability. This difference can be expressed both in rubles and in percent.

With margin figured out, and what is the markup? The markup (in English Markup) is the difference between the cost of goods and the price of sale, additive to the price of the product being implemented. I myself visual and love a visual explanation, for which I made the following picture.

Once again on points:

• KOGDA will need to be needed, the fact that the fact is for the fact that the fact is for sale, and the maintenance of Maja is a member of the FIPS of the FIPMA SALE selling goods and its cable.
• The factory has no restrictions, and it can be 100% of it, it is 100% of the cost of the cost of goods. For example, the cost of goods is 100 rubles, and the surcharge decided to make 250 rubles. In this case, the markup will be 250%.
• Mafta NE will be more than 100%, as it will exceed the price of selling goods. The biggest margin is 99.99%. If you have such, call me urgently and tell me what you do 🙂
• Margin and extra charge PPPOPSOnna DPUU. Another, which margin does not make a mark.
• These calculations are applicable to goods and services.

Before setting the markup, proceed from the competitiveness of both the goods itself and the company on the market. It is important not to forget about the development of your company regarding competitors, because some of them trades a similar product at a low price, but large volumes and on the contrary - at a high price, but small volumes.

Of course, ideally, the trade margin should allow to keep the balance between the optimal price and the expected sales volume, but in no case affect the quality of the goods or service. If you are for an unpretentious dumping - your road leads to the collapse, believe me. It brightly shows the plastic windows market in Russia. Hundreds of companies that were able to trade only with the help of an affluent pricing of prices are closed, other ways to attract the client they did not know. Only major windows and skilled trading companies remain on the window market, which make the right calculation, attract the buyer with a high level of service, product quality and can earn not only on the main product, but also on concomitant, for example on OKFIL window filters that can Suppress with each window and this will increase the overall profitability of the business. If you set a proper commercial markup to your services (or goods), then its value will be able to fully cover the costs that the unit has brought a unit and more than the company will leave the company.

MAJA and NAACEKA - very PACPPOCTPRAFLAME, now you know their meanings and differences. Use them with the mind and go to new levels of cooperation with large companies.

One of the most frequently used terms in Macroeconomics is margin. Translated from the English word MARGIN denotes the "difference". What exactly is called this term and what is it used for? We will try to tell about it as accessible as possible.

Introduction

If you turn to Wikipedia, you can find out that the margin is the difference between the enterprise's revenue and the total cost of products. This indicator is absolute, it displays the overall success of the company in the main and additional activity.

Marge is called the difference between the proceeds and the cost of goods

The absolute of this indicator allows you to use it only for internal statistics and analysis, so it is not possible to compare branches or companies by margin. To do this, use relative indicators, for example, profitability.

What is a classic margin

In the micro / macroeconomics of the margin (Grossprofit) refer to the profit, which was obtained, taking into account the full revenue and the total cost of providing services / production of products. This term most coincides with the Russian term "total profit received from the sale of all kinds of services or the finished product."

Note:the concept of margin income indicates the difference from the revenue received by the enterprise to the general variable costs for the provision of services or production.

If the "margin" expression applies in the financial field, then it usually means the difference in interest rates or various securities. Banks also use this concept - for them it means the difference between deposit deposits and loans issued.

Consider what a margin is in trading and what it depends on. In trade, this concept denotes the amount of interest, which is added to the purchase price for profit. In any embodiment, the result of all enterprises is to obtain the maximum margin or profits.

Topics of material

Good day! Today we will talk about margin, which is one of the main tools for analyzing the degree of profitability of the business.

The margin shows how successfully your company is developing, whether you are correcting the pricing policy and what is the forecast of the profitability of your business. And the main thing is that it allows you to identify all financial risks in time and timely adopt the necessary management decisions.

Today we will tell you how to calculate the size of the margin, as well as how role it plays in a business built on the production of goods in the activities of banks and in the Brokerage market.

What is margin simple words?

If it is simplistic, the margin is nothing but the difference between the "sales" value of the goods and the amount spent on its production (cost). It shows the size of the net profit of the organization in the currency or percentage equivalent.

Tracking the dynamics of this indicator for a certain period, one can analyze, in what state is the business, and compile a competent financial forecast.

That is why the margin is one of the key tools with the financial diagnosis of enterprises.

The margin is of great importance in insurance, financial activities and in the work of stock brokers.

Industrial Margin

If we talk about enterprises engaged in the production of goods, then, in this case, the margin shows the amount of net profit from selling a product.

We give a simple example. Businessman Ivan Sidorov, manufactures and sells wooden dressers wholesalers. It spends 3,000 rubles for the production of one unit of the commodity, and sells it for 4,600 rubles.

In this case, the margin in the monetary equivalent is equal to 1600 rubles. You can calculate its size in percent. For this, it is necessary from the price of an item (4,600 p.) To take its cost (3 000 p.), Split the result on the price of the chest (4,600 p.) And multiply the resulting amount per 100. Thus, we see that the margin is in this Case will be 34.7%.

And now suppose that Sidorov decided to appreciate how his business develops. To do this, it is enough to compare margin for a real period with similar numbers, for example, two years ago.

If he sees that a couple of years ago margin was 60%, a year ago 40%, and now 34.7%, then we can safely conclude that the company has lost income in recent years in recent years, and consequently profitability.

Of course, Sidorov's affairs are not so bad and his business brings profit, but the forecast in this case is already unfavorable. In this situation, the entrepreneur must score anxiety and find the cause of so bad dynamics: incorrect pricing policy, too high costs, etc.

At the same time, it is important to know that the margin is definitely an important element of the analysis of the financial efficiency of the enterprise, but it cannot be used as the only unit of measurement of its profitability.

There are two reasons for it:

• When calculating margin, many factors affecting the yield of the enterprise (seasonality, economic situation in the country, etc.) are not taken into account;
• The concept of "costs" is very extensive, and many entrepreneurs invest different meaning in it.

That is, some economists calculate march, focusing on the cost of consumables used for the production of goods. Others - take into account absolutely all costs: salary of workers, equipment depreciation, rental of premises, payment of electricity, etc.

Margin in the field of banking services

In the banking sector of the margin is one of the indicators of the organization's profitability, and is calculated as the ratio of income and expenditures of the institution.

Banks and microfinance organizations do not produce any products. They make a profit of loans provided to customers and competent investment of their funds. The main costs of banks are associated with ensuring the activities of the institution, as well as with the payment of interest in depositors.

That is, margin, here, as a rule, is no longer calculated per unit of goods (credit), but for a certain period.

If we are simplified, then the bank, in order to continue to receive good profits, should closely monitor the interest ratio, which he pays to depositors (consumption), to percentages charged with clients who have held loans (income).

That is, the main task of the banking margin is to determine how effective the institution uses the means to have.

There are several ways to calculate the bank margin. Often it is the difference between the total amount of the institution, and the profit it received for a certain period.

Margin on the stock exchange

Brokers use this indicator to determine the degree of riskiness of operations conducted by a specific client. This is analyzed by the status of its personal account. The main criteria are starting in the client's account and the minimum indicators.

Brokerage margin is fundamentally different from banking and manufacturing. In this case, the main task of margin is to show how much the client is creditworthy and whether it is worth providing him with a loan. That is, with brokerage margin transactions, this is nothing more than the financial history of the client, and it allows him to quickly receive virtual loans.

If the broker sees that since the start of the game on the stock exchange, the person has increased its budget and its income continues to grow, then, if necessary, it will easily provide a virtual loan. If, during the participation in the exchange operations, the Client has demonstrated the negative dynamics of its personal account, then it is likely to "play" in debt.

Thus, it turns out that the margin is one of the main financial indicators that allows you to determine how successful your business is.

Margin analysis helps to find the perfect ratio between the costs of the production of goods and the price on which it is implemented. Moreover, it is tracking margin that allows you to identify and evaluate all the risks. That's all, I hope everyone was clear what is margin and how to determine it!