Ask a Fool: What Is Net Margin?

Worldwide Invest Better Day 9/25/2012

In the spirit of better investing and in celebration of the first Worldwide Invest Better Day coming up on Sept. 25, Motley Fool analysts will be answering user- and reader-submitted questions leading up to the big event. "Ask a Fool" anything, and we'll do our best to help you invest better.

In the following video, Fool.com analyst Austin Smith explains net margin, which is a company's net income divided by revenue or sales. It's important to note that net margins vary wildly by industry. For example, grocery stores have notoriously slim net margins, while software companies' are very high -- compare Safeway's (NYSE: SWY  ) net margin of 1.2% with Microsoft's (NASDAQ: MSFT  ) at 23%. Watch the following video to learn why this is the case, plus all you need to know about calculating and interpreting net margins.

Click the big green button to join the thousands of people celebrating Worldwide Invest Better Day on Sept. 25!

Austin Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and Microsoft and has options on Facebook. Motley Fool newsletter services recommend Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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