What is “Net Margin” meaning?

Net margin is a business term that describes the ratio of net profit to total revenue, expressed as a percentage. It helps businesses assess how efficiently they are converting revenue into actual profit. This metric is widely used in financial analysis and strategic planning, especially when comparing company performance across industries or time periods.

Example

“Our net margin dropped last quarter due to increased operational costs, so we’re streamlining our supply chain.”

How is “Net Margin” used in business?

In business, net margin is typically used by executives, analysts, and investors to evaluate a company’s overall financial health. It reflects how well a company manages its expenses relative to its income. A higher net margin often indicates strong management and cost control, while a lower one may signal financial inefficiencies.

Pro Tip

Net margin is useful for long-term profitability analysis, but always consider it alongside other metrics like gross margin and operating margin for a complete view.

Related Terms

Gross Margin, Operating Margin, Profit and Loss Statement, EBITDA