Definition for : Normative margin

Normative Margin is an Operating margin of x% that a given company in a given sector should achieve. This concept is based on financial theory, which states that in each sector Profitability should be commensurate with the sector's risks and that sooner or later, normative Margins will be achieved, even though adjustments may take some considerable time. Normative Margin gives rise to Normalised earnings.

(See Chapter 10 Margin analysis: risks of the Vernimmen)

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