Profit margins are a financial metric that indicates how much profit a company makes for every dollar of revenue. It is calculated by dividing net income by total revenue and is usually expressed as a percentage. A higher profit margin means a company is more efficient at converting sales into actual profit, which is a positive sign for investors. There are different types of profit margins, including gross profit margin, operating profit margin, and net profit margin. Each type provides insights into various aspects of a company's profitability, helping stakeholders assess its financial health and operational efficiency.