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Margin Analysis
Margin analysis involves examining the profitability of a company’s products, services, or business segments by analyzing the difference between the selling price and the cost of production or acquisition. It helps companies understand the contribution of each product or segment to their overall profitability and identify areas for improvement. Margin analysis can be done at different levels, such as gross margin (sales minus the cost of goods sold), operating margin (operating income divided by revenue), or net margin (net income divided by revenue). By conducting margin analysis, companies can identify high-margin products or segments, optimize pricing strategies, manage costs, and make informed decisions to maximize profitability.