1. What is Net Profit Margin Percentage?

The Net Profit Margin (NPM) is a financial ratio that shows what percentage of revenue 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 from sales before any expenses are deducted

Explanation: The formula calculates what percentage of revenue remains as profit after all expenses.

3. Importance of Net Profit Margin

Details: Net profit margin is a key indicator of a company's financial health and efficiency. It shows how well a company converts sales into profits and allows comparison between companies of different sizes.

4. Using the Calculator

Tips: Enter net profit and revenue in the same currency units. Revenue must be greater than zero for calculation.

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. Some industries (like software) often have higher margins than others (like retail).

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

Q3: Can net profit margin be negative?
A: Yes, if expenses exceed revenue, the result will be negative, indicating the company is operating at a loss.

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

Q5: How often should I calculate net profit margin?
A: Businesses should track this regularly (monthly or quarterly) to monitor financial health and spot trends.