1. What is Net Profit Margin?

The 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:

• \( \text{Net Income} \) — Total profit after all expenses (including taxes)
• \( \text{Sales} \) — Total revenue or sales

Explanation: The formula shows what percentage of sales revenue translates into profit.

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 managers assess profitability, compare performance with competitors, and identify trends over time.

4. Using the Calculator

Tips: Enter net income and sales in dollars. Both values must be positive numbers, and sales cannot be zero.

5. Frequently Asked Questions (FAQ)

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

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

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

Q4: Why express it as a percentage?
A: Percentages allow for easier comparison between companies of different sizes and across industries.

Q5: How often should this be calculated?
A: Businesses typically calculate it quarterly and annually as part of financial reporting.