Net margin shows how much of each dollar the company earns translates into profits for the company. Companies generally disclose their net margin both on their quarterly financial statements and their annual financial statements. To calculate net margin, an analyst needs to use net profits and revenues from the company's income statement. The higher the net margin, the more money a company will make per each dollar of revenue the company earns.
Determine net profits. Net profits equal revenues minus cost of goods sold minus operating expenses minus interest and taxes. For example, Intel's net profit for 2009 was $4,199,000.
Determine revenues. For example, Intel's 2009 revenues were $35,127,000.
Divide net profit by revenues to get net margin. In our example, $4,199,000 / $35,127,000 equals 0.1195 or 11.95 percent.
Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.