Net Profit Margin (NPM) is a financial ratio that measures the percentage of profit a company produces from its total revenue. It shows the amount of net profit per dollar of revenue collected. A higher net profit margin indicates a more profitable company that has better control over its costs compared to its competitors.
The formula to calculate Net Profit Margin is:
\[\\text{Net Profit Margin} = \\frac{\\text{Net Profit}}{\\text{Revenue}} \\times 100\%\]
Where:
Let's calculate the Net Profit Margin for a company with the following financial data:
Visual representation:
Therefore, the Net Profit Margin for this company is 15%, meaning the company keeps $0.15 as profit for every dollar of revenue generated.
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