1. What is Net Profit Margin?

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:

• \( \text{Revenue} \) — Total income from sales
• \( \text{All Costs} \) — Sum of all expenses including COGS, operating expenses, taxes, and interest

Explanation: The formula shows what percentage of each dollar earned is actual profit after accounting for all costs.

3. Importance of Net Profit Margin

Details: Net Profit Margin is crucial for assessing business profitability, comparing performance across industries, and making investment decisions. Higher margins generally indicate more efficient operations.

4. Using the Calculator

Tips: Enter revenue and all costs in dollars. Revenue must be greater than zero for a valid calculation. The result shows the profit margin as a percentage.

5. Frequently Asked Questions (FAQ)

Q1: What's a good net profit margin?
A: It varies by industry, but generally 10% is average, 20% is good, and 5% is low. Service businesses often have higher margins than retailers.

Q2: How is this different from gross profit margin?
A: Gross margin only subtracts COGS, while net margin subtracts all expenses including operating costs, taxes, and interest.

Q3: Can net profit margin be negative?
A: Yes, if costs exceed revenue, indicating the business is losing money.

Q4: How often should I calculate this?
A: Businesses should track it monthly to monitor financial health and spot trends.

Q5: Does higher revenue always mean higher margin?
A: Not necessarily. If costs increase proportionally more than revenue, margins can decrease despite higher sales.