DECA Sports and Entertainment Marketing Practice Exam

Profit margin is defined as the difference between what two financial aspects?

1. Expenses and retail price

2. Total revenue and expenses

3. Product cost and market value

4. Sales volume and expenses

The correct answer is: Expenses and retail price

Profit margin is defined as the difference between total revenue and expenses. This financial metric measures the percentage of revenue that represents profit after all expenses have been deducted. It reflects the efficiency of a company in managing its costs relative to its revenue generation. Expenses encompass all costs incurred in the operation of a business, such as production costs, administrative expenses, and marketing expenditures. Total revenue, on the other hand, is the total amount of money generated from sales before any expenses are deducted. The correct understanding of profit margin is crucial as it helps businesses assess their profitability and make informed financial decisions. It indicates how much money a company keeps from its sales after covering all expenses, which is essential for long-term sustainability and growth.