Profitability shows how well companies can turn their sales into profits, and margins are a measure of profits as a percentage of sales. There are many different margin figures that can be calculated. Let's look at three. The first is EBIT margin. You take your EBIT, or earnings before interest and tax, and divide it by sales or revenue. Similarly, you can take EBITDA margin. You take with your EBITDA, or earnings before interest, tax, depreciation, and amortization, and again, divide it by sales. Lastly, our third one very similar is net margin. We take your net income and divide it by sales. If I calculate a business' net margin, and look at it over time, we may find that a few years ago we made sales of a hundred and we made net income of five, but now we may find that we make sales of a hundred and net income of seven, thus showing an improvement from 5% to 7%. We must be better at controlling our costs and improving our profits: the net income.