1. What is Net Profit Margin?

Net Profit Margin 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 sales a company actually keeps in earnings.

2. How Does the Calculator Work?

The calculator uses the Net Profit Margin formula:

Where:

• Net Profit — Total revenue minus all expenses (including taxes and interest)
• Revenue — Total income from sales of goods or services

Explanation: The formula calculates what percentage of revenue is converted to profit. A higher percentage means more efficient cost management.

3. Importance of Net Profit Margin

Details: Net profit margin is a key indicator of a company's financial health and profitability. It allows comparison between companies of different sizes and across industries.

4. Using the Calculator

Tips: Enter net profit and revenue in dollars (without commas). Both values must be positive, and revenue cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What is a good net profit margin?
A: It varies by industry, but generally 10% is average, 20% is good, and 5% is low. Compare with industry benchmarks.

Q2: How is net profit different from gross profit?
A: Gross profit only subtracts cost of goods sold, while net profit subtracts all expenses including operating costs, taxes, and interest.

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

Q4: Why is net profit margin expressed as a percentage?
A: The percentage format allows for easy comparison between companies of different sizes and across time periods.

Q5: How often should I calculate net profit margin?
A: Businesses should track it monthly, quarterly, and annually to monitor financial health and trends.