Final answer:
Profit margin gives a clear view of a firm's profitability by calculating the average profit, which is the difference between market price and average cost. If market price exceeds average cost, the firm makes a profit; otherwise, it faces a loss.
Step-by-step explanation:
True, profit margin does provide a comprehensive profit picture of a firm. The profit margin is calculated by the formula average profit = price - average cost. This measure indicates how much of each dollar of revenues is left over after all expenses have been paid. If the market price is above the average cost, then the average profit, and therefore the total profit, will be positive. Conversely, if price is below average cost, the firm will incur losses, indicating negative profits.