Financial margins definition its causes Calculation and Examples

Financial margins

The definition of financial margins is the difference between the financial market price of an object assigned or awarded as collateral for a loan or mortgage and the representative value.

It is the divergence between the benefits of one or more financial products, less the price of the resources obtained through loans.

What causes the financial margins?

The interest and profits derived from the various financial benefits such as investments in loans and prices, as well as the amount of borrowed resources originate the financial margin.

It consists of the difference between the income from the intermediation procedures, interrelated movements and the expenses incurred for the financing of these activities.

There are other types of margins that are related to the financial margin , for example:

  • The intermediation margin: it is the good that the banks obtain for their interventions.
  • The gross profit margin: is the profit obtained after subtracting the sales price from the total sales, that is, labor, materials, etc., divided by the total income, to originate a profit.
  • The net profit margin : it is the profit that remains after paying for all the fixed general expenses and taxes, it is used to contrast the dividends of a company against another of its same production.

Calculation of the financial margins

  • The calculation of the financial margin = financial returns – financial costs

The time perspective treated, can be quarterly, annually, etc., this is established for companies, organizations and banks. They have the financial products and have obtained resources from other intermediaries.

A company knows what assets and liabilities it has, what are the conditions of the contracts, terms, etc. With this information, you will be able to calculate the financial income you will get in a year , what benefits, how much you have borrowed and how much interest you will get.

In the same way, liabilities are where all the loans or commitments made by the company are found, which must be returned and how much interest must be paid for this obligation.

Examples of financial margins

  1. The financial margin refers to the difference between the variety of financial products and cheap prices.
  2. The financial margin is the calculation of a possible profit or loss in a transitory perspective.
  3. It is based on the difference between the income obtained from the various economic products in possession and the price.

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