1. What is Net Income Percentage?

Net Income Percentage is a profitability ratio that shows what percentage of revenue is converted to profit. 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 income percentage formula:

Where:

• Net Income — Total profit after all expenses have been deducted
• Gross Income — Total revenue before any expenses are deducted

Explanation: The formula calculates what portion of gross income remains as net profit, expressed as a percentage.

3. Importance of Net Income Percentage

Details: This metric is crucial for assessing a company's profitability, comparing performance across periods or competitors, and making informed business decisions.

4. Using the Calculator

Tips: Enter both net and gross income in the same currency units. Net income must be less than or equal to gross income. Values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good net income percentage?
A: This varies by industry, but generally 10-20% is considered good, while 5% might be typical for some low-margin businesses.

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

Q3: Can net income percentage be negative?
A: Yes, if expenses exceed revenue, indicating a net loss rather than profit.

Q4: Why track this percentage over time?
A: Tracking helps identify trends in profitability and operational efficiency.

Q5: How often should this be calculated?
A: Typically calculated for each financial reporting period (monthly, quarterly, annually).