Net Profit Margin

Net profit margin, abbreviated as NPM, also called net margin, is the percentage of revenue left after all expenses have been deducted from sales.  NPM is used to measure the profitability of a company by expressing its net profit as a percentage of its total revenue.  It indicates the portion of revenue that remains as profit after all expenses, including taxes and interest, have been deducted.  Net profit margin is often used by investors and analysts to evaluate a company's financial health and efficiency in managing its expenses.

A higher net profit margin indicates that the company is generating more profit from its revenue, which is generally favorable.  Conversely, a lower net profit margin may suggest that the company has higher expenses relative to its revenue, which could be a cause for concern.  However, the interpretation of net profit margin also depends on industry standards and the company's specific circumstances.

 

Net profit Margin Formula

\( NPM =  ( NP \;/\; TR ) \; 100  \) \( NP =  NPM \; TR \;/\; 100   \) \( TR =   NP \; 100 \;/\; NPM   \)

Symbol

\( NPM \) = net profit margin

\( NP \) = net profit

\( TR \) = total revenue