Net Profit Margin
📈 Investing
Quick Definition
Net Profit Margin is a financial ratio that measures the percentage of net income derived from total revenues, indicating how much of each dollar earned by the company is translated into profits.
Formula
Net Profit Margin = (Net Income / Revenue) * 100Examples
- 1A company with $200,000 in annual revenue and $50,000 in net profit has a net profit margin of 25%.
- 2If a business earns $1 million in revenue but only keeps $100,000 after all expenses, its net profit margin is 10%.
- 3An increase in net profit margin from 15% to 20% suggests that the company is becoming more efficient in converting sales into actual profit.
Tags
profitabilityfinancial-ratiosincome-statementefficiencybusiness-performance
Related Terms
Other terms you might find helpful
Gross Profit Margin
Gross profit margin is a financial metric that measures the percentage of revenue that exceeds the cost of goods sold (COGS). It indicates how efficiently a company uses its resources to produce and sell products at a profit.
Operating Margin
Operating margin is a profitability ratio that measures the percentage of profit a company makes from its operations, relative to its revenue.
Quick Info
Category:Investing
Difficulty:intermediate
Last Updated:6/19/2025