Net Income Margin (also referred to as return on sales or net profit margin) measures how much profit a company makes for each dollar in revenue. While the net profit will give us the actual amount of money earned, the net income margin gives us a percentage. This in turn provides us with a measure we can now use to compare companies or business units.
Net income margin is an important indicator measuring how efficient a company (or business unit) is and how well it is able to control its costs.
Net Income Margin = (Net Income/ Revenues) x 100
This indicator is included in the book: Key Performance Indicators - the 75+ measures every manager needs to know, which contains an in-depth description of this KPI, as well as practical advice on data collection, calculations, target setting, and actual usage.
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