Net Profit Margin
Net income as a percentage of revenue after all expenses, interest, and tax
What is Net Profit Margin?
Net profit margin is the percentage of revenue that remains as profit after all costs, interest and tax. It shows how much of each sale the business keeps.
It is the final measure of overall profitability, reflecting every decision from pricing to financing.
How this KPI is measured
- Function
- Finance
- Sub-function
- Financial Reporting
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- %
- Measurement frequency
- Monthly / Quarterly / Annual
- Formula
- (Net profit / Revenue) × 100
How to calculate it
Divide net profit by revenue, and multiply by 100.
For example, if net profit is 1,500,000 on revenue of 20,000,000, the margin is 7.5%.
Compare with earlier periods and similar businesses. Separate one-off items to see the underlying margin.
Where it is used
Assessing overall profitability
See what is kept from sales.
Tracking performance
Follow margin over time.
Comparing businesses
Benchmark against peers.
How to improve it
Tips and common mistakes
- Compare only with similar industries.
- A high margin on low volume may not maximise profit.
- Look at trends, not single periods.
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