Most people who own a company would say that a big reason they’re in business is to make money. There’s more to being successful, however, than the absolute dollar amount you bring in.
Revenue and profit are important, but alone they do not provide the full picture of a company’s overall health. Revenue shows how much you’ve earned and profits show how much money your company has made in absolute terms. Margin ratios, however, offer a look at your profitability by telling you how much you’re making relative to your revenue. It’s not an absolute metric, and that’s a good thing.