Net Margin

Net Margin is a key indicator for measuring a company's profitability, calculated as net profit divided by operating revenue, expressed as a percentage. In foreign trade, net margin reflects the final profitability level after deducting all costs and expenses (including production costs, freight, tariffs, commissions, administrative expenses, financial expenses, and income tax, etc.). Use cases include: evaluating the profitability of different product lines or markets, negotiating pricing with suppliers or customers, formulating annual budgets and strategic planning. Notes: Net margin is significantly affected by exchange rate fluctuations, tax rebate policies, and trade terms (such as FOB, CIF). Under different trade terms, the party bearing costs differs, making net margins not directly comparable. Additionally, the difference between net margin and gross margin is: gross margin only deducts direct costs (such as procurement costs, production labor), while net margin covers all period expenses and taxes, so net margin is lower but more comprehensively reflects a company's actual earning ability. Foreign trade practitioners should focus on net margin rather than only looking at gross margin, to avoid hidden costs eroding profits.