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Formula – Profit Margin
PM = C/I
PM – Profit margin
C – Cash flow
I – Gross income
The profit margin formula is used to measure the strength of cash flow.
The results are useful in comparing between different income properties to evaluate which would make a better investment.
Other than comparing against a specific property, it can also be put against the market average to judge whether it is performing above or below the market.
Just because a specific property loses out to another doesn’t mean that it’s a loser. If it is performing above the market, this factor can still make it a good investment.