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

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.

Investment dictionary. . 2012.

Look at other dictionaries:

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  • net margin — See: net profit …   Accounting dictionary

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  • Transactional Net Margin Method — The Transactional net margin method (TNMM) in Transfer pricing compares the net profit margin of a taxpayer arising from a non arm s length transaction with the net profit margins realized by arm s length parties from similar transactions; and… …   Wikipedia

  • Net profit margin — Net income divided by sales; the amount of each sales dollar left over after all expenses have been paid. The New York Times Financial Glossary * * * net profit margin UK US noun [C] ACCOUNTING, FINANCE ► NET MARGIN(Cf. ↑net margin) …   Financial and business terms

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