Profit margin is computed by taking:

Break down the components: Net income is the profit remaining after all expenses, taxes, and costs have been deducted from total revenue. Net sales represent the total revenue generated from sales after deducting returns, allowances, and discounts.

Explain the calculation process: To compute the profit margin, divide the net income by the net sales. For example, if a company has a net income of $50,000 and net sales of $200,000, the profit margin would be calculated as \( \text{Profit Margin} = \frac{\text{Net Income}}{\text{Net Sales}} \).