In words, what does a profit margin of 0.10 mean? For each exist1 of sales generated by the firm it earns 10 cents in net income. For each exist1 of profits generated by the firm pretax it keeps 10 cents after-tax. For each exist1 of net income generated, 10 cents in sales are required. For each exist1 of sales generated by the firm it incurs 10 cents in operating expenses. The firm completely sells off its production level 10times on average during the year