Page "Profit margin" Paragraph 2

The profit margin is mostly used for internal comparison.

It is difficult to accurately compare the net profit ratio for different entities.

Individual businesses ' operating and financing arrangements vary so much that different entities are bound to have different levels of expenditure, so that comparison of one with another can have little meaning.

A low profit margin indicates a low margin of safety: higher risk that a decline in sales will erase profits and result in a net loss, or a negative margin.