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's a key indicator of a company's financial health and profitability.

2. How Does the Calculator Work?

The calculator uses the Net Profit Margin formula:

Where:

• \( \text{Net Profit} \) — Total profit after all expenses (in dollars)
• \( \text{Revenue} \) — Total income/sales (in dollars)

Explanation: The formula calculates what percentage of each dollar earned translates into profit.

3. Importance of Net Profit Margin

Details: Net profit margin helps investors and managers assess a company's profitability, compare performance across companies/industries, and track financial health over time.

4. Using the Calculator

Tips: Enter net profit and revenue in dollars. Both values must be positive, and revenue 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 average, 20% is good, and 5% is low. Compare with industry benchmarks.

Q2: Can net profit margin be negative?
A: Yes, if expenses exceed revenue, resulting in a net loss rather than profit.

Q3: How is this different from gross profit margin?
A: Gross margin only considers cost of goods sold, while net margin includes all expenses (operating, interest, taxes, etc.).

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

Q5: How often should net profit margin be calculated?
A: Typically calculated quarterly with financial statements, but can be done monthly for internal tracking.