Margin pressure - How To Discuss

Margin analysis is primarily used to understand how profitable unit sales are at different points on the income statement in comparison to total revenue. A unit of sales can be adjusted for a multitude of costs including direct costs, operating costs, and net costs. In general, anything that makes a company’s costs or revenues change will usually cause a change in the margin. Margin pressure is perceived as any cost or revenue change that could lower a margin calculation, ultimately resulting in lower profitability.

Margin pressure is the risk of negative effects from internal or external forces on a company's profitability margins. Most commonly margin pressure analysis will focus on the three main income statement margin calculations: the gross, operating, or net margin. Overall margin pressure can also be analyzed within contribution margins as well.

The effect that various internal or market forces have on a companys margins. Some internal forces can include production issues or delays. Some external forces that affect a companys margin include increased regulatory controls, new industry related legislation, or macroeconomic events like rising oil prices.