What Is Net Profit Margin?
Net profit margin is one of the most important profitability ratios in business. It measures how much of every dollar of revenue a company keeps as profit after subtracting all costs — including operating expenses, interest, taxes, and one-time charges. A higher net margin means a more profitable, efficient company.
How to Use This Calculator
Enter your net income (the bottom-line profit after every expense) and your total revenue (sales or turnover) for the same period. The calculator divides net income by revenue and multiplies by 100 to express the result as a percentage.
The Formula Explained
The equation is simple:
$$\text{Net Margin} = \frac{\text{Net Income}}{\text{Revenue}} \times 100\%$$Net income comes from the bottom of the income statement; revenue is the top line. Because both figures use the same currency and period, the ratio is dimensionless and comparable across companies of different sizes.
Worked Example
Suppose a company earns $150,000 in net income on $1,000,000 of revenue. The net margin is
$$150{,}000 \div 1{,}000{,}000 \times 100 = \mathbf{15\%}$$That means the business keeps 15 cents of profit from every dollar of sales.
FAQ
What is a good net profit margin? It varies by industry. Software firms may exceed 20%, while grocery retailers often run below 5%. Compare against peers in the same sector.
How is net margin different from gross margin? Gross margin only subtracts the cost of goods sold, while net margin subtracts all expenses including operating costs, interest, and taxes.
Can net margin be negative? Yes. If net income is negative (a loss), the net margin will be negative, indicating the company spent more than it earned.
