Net income as a percentage of revenue; what is left for shareholders after every cost, including interest and tax.
Net margin is the most quoted and least comparable margin, because it folds in financing choices, tax domicile and every one-off item. Two identical operators can report very different net margins purely because one carries debt.
It is still the right measure for one purpose: it links directly to eps and therefore to the pe-ratio. Use operating-margin to judge the business and net margin to understand the reported earnings.
Example: Northwind Tools earns $78M on $840M, a 9.3% net margin. Stripping the $18M of interest-expense and taxing at the same rate would lift it to 10.9%.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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