A margin is just profit expressed as "out of every ₹100 of sales." That's it. No mystery.
Gross margin — out of ₹100 in sales, what's left after just the direct cost of the product? A software company might keep ₹80 (code costs little to copy). A supermarket might keep ₹22 (it buys goods and resells them with a thin markup). Neither is "wrong" — they're different species. The danger sign is a company's gross margin shrinking over time: it usually means competitors are forcing prices down, or costs are rising and the company can't pass them on.
Operating margin — what's left after also paying to run the whole operation (salaries, rent, marketing). This is the fairest test of business quality, because it can't hide behind loans or tax tricks.
Net margin — the final survivor, after interest and tax. Out of every ₹100 of sales, this is what shareholders truly earned.
The powerful concept hiding inside margins is pricing power — can the company raise prices without customers leaving? High, stable margins over many years are usually the fingerprint of pricing power (think of how easily you accept price increases from a brand you trust). Thin, unstable margins are the fingerprint of a business that competes on price alone — one price war away from losses.
Key Takeaway
Margins turn any company, of any size, into the same simple question: out of every ₹100 of sales, how much survives? Compare margins within an industry, and watch the trend more than the level.
Think About It
Which product do you personally keep buying even after its price rises? That's pricing power — and its maker's margins probably show it.
Live Lab — The ₹100 Test
Open stockanalysis.com/stocks/aapl/statistics/ and find gross, operating, and profit margins listed plainly. Compare them against stockanalysis.com/stocks/wmt/statistics/. Then check whether the margin is rising or falling over 5 years on the financials tab. Indian version: screener.in/company/HINDUNILVR/consolidated/ — OPM % (operating profit margin) is shown right in the Profit & Loss table, year by year.