Question

what does a 20% profit margin imply about a companys financials?
for every $100 in sales, the company earns $2 as profit.
for every $100 of revenue, the company retains $20 as profit.
from $20 in revenue, the company generates $100 in profit.

Explanation:

Profit margin is calculated as (Profit / Revenue) × 100%. A 20% profit margin means that for every $100 of revenue, the profit is $20 (since 20% of 100 is 20). The first option calculates 2% of 100 (not 20%), and the third option has revenue and profit reversed. So the correct interpretation is the second option.

Answer:

B. For every $100 of revenue, the company retains $20 as profit.