1. What is Net Profit Margin?

Net Profit Margin (NPM) is a financial ratio that shows the percentage of revenue that remains as profit after all expenses are deducted. It measures how much out of every dollar of revenue a company keeps as profit.

2. How Does the Calculator Work?

The calculator uses the Net Profit Margin formula:

Where:

• \( NPM \) — Net Profit Margin (percentage)
• \( \text{Net Profit} \) — Total profit after all expenses (currency)
• \( \text{Revenue} \) — Total income/sales (currency)

Explanation: The formula calculates what percentage of revenue is converted to profit. Higher percentages indicate more efficient companies.

3. Importance of NPM Calculation

Details: Net Profit Margin is crucial for assessing a company's financial health, comparing profitability across companies/industries, and evaluating business efficiency over time.

4. Using the Calculator

Tips: Enter net profit and revenue in the same currency units. Both values must be positive, and revenue cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good Net Profit Margin?
A: This varies by industry. Generally, 10% is average, 20% is good, and 5% is low. Compare with industry benchmarks.

Q2: How is NPM different from gross profit margin?
A: Gross margin only considers cost of goods sold, while NPM includes all expenses (operating, interest, taxes).

Q3: Can NPM be negative?
A: Yes, if expenses exceed revenue. This indicates the company is losing money.

Q4: Why might NPM decrease over time?
A: Possible reasons include rising costs, price competition, inefficiencies, or increased expenses.

Q5: How often should NPM be calculated?
A: Typically quarterly with financial statements, but can be calculated monthly for internal tracking.