Economic Margin
A measure of a company�s ability to generate returns above its cost of capital, often used to assess financial performance.
Implications
A measure of a company's financial performance that compares its return on invested capital (ROIC) to its cost of capital, used to assess whether a company is creating or destroying value, often considered a more accurate reflection of true economic profitability than traditional accounting metrics.
Example
Example: A manufacturing firm calculates its economic margin to determine whether its new investment in automation technology is generating returns above the cost of the capital used to finance it, confirming value creation.
Related Terms
Different from net profit margin, which looks at the ratio of net income to revenue, economic margin focuses on the value generated relative to the cost of capital, offering a broader view of financial health.
Get INSTANT comprehensive market research of any industry
Chat with AII Consultant Now!
