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 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 (taxes, cost of goods sold, operating expenses, etc.)
• Revenue — Total income generated from sales

Explanation: The formula shows what percentage of each dollar earned by the company is translated into profits.

3. Importance of Net Profit Margin

Details: Net profit margin is a key indicator of a company's financial health and efficiency. It helps investors and analysts compare profitability between companies and industries.

4. Using the Calculator

Tips: Enter net profit and revenue in the same currency units (both in dollars, euros, etc.). Revenue must be greater than zero.

5. Frequently Asked Questions (FAQ)

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

Q2: How is net profit margin different from gross profit margin?
A: Gross margin only considers cost of goods sold, while net margin includes all expenses.

Q3: Can net profit margin be negative?
A: Yes, if expenses exceed revenue, resulting in a net loss.

Q4: Why compare net profit margins?
A: It helps assess a company's profitability relative to competitors and industry benchmarks.

Q5: How can companies improve their net profit margin?
A: By increasing revenue, reducing costs, or a combination of both.