Investing term

What is Net margin?

Net income as a percentage of revenue — final profit per dollar of sales.

Net margin is net income as a percentage of revenue — how many cents of final profit a company keeps from each dollar of sales. It captures the full efficiency of the business after every cost. Comparing net margins within an industry shows who runs the tightest ship, though margins vary enormously across sectors, so compare like with like.

For example

A company earning $1.2M on $10M of sales has a 12% net margin — it keeps 12 cents of profit from every revenue dollar.

Net margin is taught hands-on in Stage 14 — Reading Financial Statements.

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Related terms

Accounts receivable (A/R)Money customers owe the company for goods or services already delivered but not yet paid.AccrualsAccounting entries that record revenue or expense before cash actually moves.Annual reportThe yearly disclosure that includes audited financials, MD&A, and footnotes — the primary source for serious investors.Balance sheetThe 'photo' statement — what the company owns, what it owes, and what's left for owners, on a single date.
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