Net Profit Margin
Net profit margin (or profit margin, net margin, return on revenue) is a ratio of profitability calculated as after-tax net income (net profits) divided by sales (revenue). Net profit margin is displayed as a percentage. It shows the amount of each sales dollar left over after all expenses have been paid.
Net profit margin is a key ratio of profitability. It is very useful when comparing companies in similar industries. A higher net profit margin means that a company is more efficient at converting sales into actual profit.
Net profit margin calculation (formula)
Net profit margin = Profit (after tax) / Revenue
Both variables are shown on the income statement or statement of comprehensive income.
Compare: gross margin, return on sales.
Exact Formula in the ReadyRatios Analytic Software
Net profit margin = F2[ProfitLoss]/F2[Revenue]
F2 – Statement of comprehensive income (IFRS).
You can find industry benchmarks for profit margin in our reference book.
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