What does average profit margin indicate?

The average profit margin is a key financial metric that reflects the average profit generated across different sales categories or product lines. It represents how much profit a company makes from its sales after accounting for all associated costs. This metric is calculated by taking the difference between total revenue and total expenses, and then dividing that by total revenue, which provides insight into the profitability of various offerings within the business.

Choosing this answer makes sense because it directly relates to understanding how different products or sales categories contribute to overall profit, allowing businesses to assess performance and make informed decisions about pricing, cost management, and resource allocation.