What does 'profit margin' refer to in business?

Profit margin refers to a key financial metric that indicates how much of a company's revenue is retained as profit after accounting for the costs directly associated with producing goods or services. This concept is pivotal for understanding a business's financial health, as it provides insight into how effectively a company manages its costs relative to its revenue.

The correct choice highlights that profit margin is calculated as the difference between revenue and the cost of goods sold (COGS). This difference helps businesses evaluate their pricing strategies and cost management. A higher profit margin suggests that a company is keeping a larger portion of its revenue as profit, which can be a sign of good operational efficiency or strong pricing power.

Understanding this concept allows business owners and managers to make informed decisions about pricing, cost-cutting measures, and overall profitability. Thus, it serves as a fundamental tool for analyzing performance and making strategic business decisions.

In contrast, the other options refer to different financial metrics or concepts. Total revenue generated by a company reflects overall sales without considering costs. Net income after taxes and expenses shows the remaining profit after all financial obligations are met, but it is not the same as profit margin, which looks specifically at direct production costs. The total amount of assets owned by a business relates to its balance sheet rather