Which formula is used to calculate the net margin ratio?

The net margin ratio is a key financial metric used to assess a company's profitability, specifically indicating how much of each dollar of revenue is translated into net income. The formula for calculating the net margin ratio is net income divided by revenue. This ratio provides insight into the efficiency of a company in converting sales into actual profit after all expenses, taxes, and costs have been accounted for. A higher net margin implies better profitability and financial health, reflecting a company's ability to control costs relative to its sales.

In contrast, other formulas listed do not accurately measure net margin. Operating income divided by revenue focuses specifically on earnings from core business operations, while revenue divided by total assets measures asset efficiency rather than profitability. Lastly, net profit divided by total liabilities does not reflect the relationship between earnings and revenue, thus failing to provide an accurate measure of net margin.