Nettomarge

Nettomarge, or net profit margin, is a key profitability metric used in financial analysis to show how much of each unit of revenue remains as net income after all expenses are deducted. The conventional formula is Nettomarge = (Nettogewinn/Umsatz) × 100, where Nettogewinn is net income and Umsatz is revenue (sales). In English terms, net margin = net income divided by revenue.

Calculation example: If a company reports revenue of 1,000,000 and net income of 100,000, the nettomarge is 10 percent. This indicates that for every euro earned in revenue, 0.10 euro remains as profit after all costs.

Interpretation and use: A higher nettomarge signals greater profitability and efficiency in converting sales into profit. The metric is influenced by pricing strategy, cost structure (both fixed and variable costs), operating efficiency, tax rates, the cost of debt, and any one-time items. It is commonly used to compare profitability across companies, to assess performance over time, and to benchmark against industry norms, which can vary widely.

Limitations: Nettomarge can be distorted by non-recurring gains or losses, aggressive accounting practices, or differences in tax treatment and depreciation methods. Cross-country comparisons can be affected by currency fluctuations and accounting standards. Therefore it is often supplemented with other metrics such as gross margin, operating margin, and EBITDA margin.

See also: net income, revenue, gross margin, operating margin, EBITDA margin. Nettomarge is a term frequently used in German-speaking financial reporting.