Net Margin

AAA

DEFINITION of 'Net Margin'

The ratio of net profits to revenues for a company or business segment - typically expressed as a percentage – that shows how much of each dollar earned by the company is translated into profits. Net margins can generally be calculated as:

Net Margin




INVESTOPEDIA EXPLAINS 'Net Margin'

Net margins will vary from company to company, and certain ranges can be expected from industry to industry, as similar business constraints exist in each distinct industry. A company like Wal-Mart has made fortunes for its shareholders while operating on net margins less than 5% annually, while at the other end of the spectrum some technology companies can run on net margins of 15-20% or greater.

Most publicly traded companies will report their net margins both quarterly (during earnings releases) and in their annual reports. Companies that are able to expand their net margins over time will generally be rewarded with share price growth, as it leads directly to higher levels of profitability.


RELATED TERMS
  1. Trading Margin Excess

    The funds that remain in a margin trading account that are available ...
  2. Low-Cost Producer

    A company that can provide goods or services at a low cost. In ...
  3. Gross Margin

    A company's total sales revenue minus its cost of goods sold, ...
  4. After-Tax Profit Margin

    A financial performance ratio, calculated by dividing net income ...
  5. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
  6. Operating Income

    The amount of profit realized from a business's operations after ...
Related Articles
  1. Measuring Company Efficiency
    Fundamental Analysis

    Measuring Company Efficiency

  2. A Look At Corporate Profit Margins
    Markets

    A Look At Corporate Profit Margins

  3. Take Control With Investing Absolutes
    Investing

    Take Control With Investing Absolutes

  4. Profitability Indicator Ratios
    Markets

    Profitability Indicator Ratios

comments powered by Disqus
Hot Definitions
  1. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  3. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  6. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
Trading Center