Net Income Margin

A useful measure of a Company’s overall level of operating efficiency is Net Income Margin. Expressed as a percentage, Net Income is divided by Sales.

The Net Income Margin is calculated by the following formular:

NIM = Net Income / Sales

Expressed as a percent, NIM measures a Company’s overall level of operating efficiency, a comparison can be made over the previous Financial Years. For Inter Sectorial comparisons, the Net Income Margin has limited use because of the impact of Depreciation, Amortisation, Taxes and Capital Structure. A comparison of companies with headquarters in different countries, does not really make sense for the reasons stated above.