The Net Profit Margin (%) is a profitability ratio that indicates how much profit a company makes for every dollar of revenue it generates. It reflects the percentage of revenue that is retained as net income after all expenses, including operating costs, non-operating expenses, interest, and taxes, have been deducted.
Calculation:
The formula for Net Profit Margin is:
Net Profit Margin (%) = (Net Income / Revenue) × 100
Where:
- Net Income is the company's earnings after all expenses and taxes have been subtracted from revenue.
- Revenue is the total sales or income generated by the company from its primary operations.