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# WHAT means margin

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The term margin is used in trading, stock exchange, insurance and banking practice to indicate the difference between the prices of goods, shares, interest rates.

This is an analogue of the concept of profit.

The margin can be expressed both in absoluteValue (in the ruble equivalent), and in percent (as a coefficient of profitability). In the latter case, it is calculated as the ratio of profit (the difference between price and cost) to the price. It is necessary to distinguish margins from trading margins. The latter represents the ratio of the difference between price and cost to cost.
In absolute terms, margin is the difference between the selling price and the cost price.

Margin = ((price - cost price) / price) * 100%.

The margin is a key factor in the analysisPricing, efficiency of marketing expenses, profitability of clients. Often the analysis of the company's activities is based on the gross margin. It is calculated as the difference between the company's revenue and variable costs for the sale of products.

Gross margins = sales revenue - variable production costs.

The size of gross margin determines the net profit from which the development funds are formed.
In Europe, the gross margin is understood a little differently - as a percentage of gross sales revenue, which remains with the company after its direct production costs incurred.
There is also the concept of "profit margin", meaning the share of profit in revenue or profitability of sales.

## Margin in exchange activities

In the exchange activity margin (Margin)Represents a pledge, which makes it possible to obtain a money (commodity) loan for making speculative transactions in marginal trading. Usually, it is expressed as a percentage of the collateral to the amount of the transaction.
At Forex margin - a security deposit,Necessary for opening positions. For example, with a leverage of 1:20, in order to purchase \$ 100,000, the balance on the brokerage account must be at least \$ 5,000. The higher the leverage, the lower is the margin (margin).

## Margin in banking activities

The margin is subdivided into credit, bank, guarantee. Credit margin implies the difference between the real value of the goods and the amount given out to the borrower.
Banking margin is defined as the difference betweenCredit and deposit rates. A net interest margin is also used to assess the profitability of the bank - this is the difference between the interest income of the bank through lending and investment projects and the rate paid on capital and liabilities. This indicator allows you to draw conclusions about the effectiveness of capital investment.
With respect to the loan, the margin is calculated - the difference between the value of collateral and the size of the loan.