Net margin

Net margin is the last of the margins and the most complete: it counts the cost of the product, the cost of running the company, the cost of its borrowing and the tax. Five cents of profit per dollar of sales is a supermarket; thirty is a business with something other people cannot easily copy.

Because everything is in it, it moves for reasons that have nothing to do with trading — a refinancing, a change of tax jurisdiction, a one-off charge. It is the best summary and the worst diagnostic.

Net income of $150m on revenue of $1,000m.

1. 1150 / 1,000 = 0.15.

Every example in this glossary describes the same imaginary company, so the figures join up as you move between metrics.

• Compare against the same industry only. The range across industries is enormous and says more about the business model than about management.
• When it moves, walk back up the income statement to find out where. Gross margin, operating margin and the tax rate each explain a different kind of change.
• A margin far above the industry either reflects a real advantage or an accounting difference, and it is worth knowing which.

• One-off gains and charges distort it in both directions, sometimes by more than the underlying business earns.
• It is meaningless where earnings are negative, and unstable where they are near zero.
• Companies with very different debt loads are not comparable on it, because interest is inside the numerator.

Computed as a profitability ratio in the Financials tab. It also does a job nobody sees: an implausible net margin is the standing tripwire in the data audit for revenue read from a concept holding only a fragment of it. A 407% margin is what a fragment denominator looks like, and that check is how a defect affecting every bank in the universe was caught after the one affecting REITs had already been fixed.

The full methodology covers where the figures come from, how the statements are normalised, and what is deliberately left unadjusted.