How is Net Margin calculated?

Net Margin is a key financial metric that measures the profitability of a company by depicting what percentage of revenue is retained as profit after all expenses are deducted. The correct option encompasses the comprehensive calculation needed to derive this margin.

To arrive at the Net Margin, one must consider the total sales revenue generated by the business, then subtract not only the cost of goods sold (COGS), which represents the direct costs attributable to the production of goods sold, but also all variable expenses that can fluctuate with levels of output or sales. These variable expenses include costs such as raw materials, direct labor, and other costs associated with producing goods that vary directly with sales volume.

This full deduction of costs provides a more accurate reflection of the actual profit available after accounting for all expenses associated with generating those sales. Hence, the chosen option correctly identifies the necessary components for an accurate calculation of Net Margin, making it the most comprehensive and correct answer among the provided choices.