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.
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