what is net margin?

i wasn't able to understand how exactly do we measure net margin and what is the difference between gross margin and net margin?

2 Answer(s)


Lets take an example of the car company Honda. Whatever expense is incurred to the spare parts needed to make the car - engine, tires, steel, locks, windhsield, wipers etc are termed as Gross margin.

Other expenses that are not directly related to the car like salaries, rent, marketing expense, etc are operating expenses. So

Revenue - COGS = Gross Margin
Gross Margin - Opex = Net Margin


Gross margin - operating expensiture = net margin

net margin % = Net margin/Sales*100