How to Calculate Net Margin

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All the information needed to calculate net margin is on a company's income statement.
All the information needed to calculate net margin is on a company's income statement. (Image: Financial report and pen image by PaulPaladin from Fotolia.com)

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.

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