![]() ![]() Now scroll down to see how to interpret your calculations, and learn if there are proper or advisable values of the net profit margin ratio. Employ the net profit margin formula by dividing net profit by total revenue, or - since you're here - do it using our net profit margin calculator. ![]() The result of this equation is not an absolute number but rather a percentage of total revenue. ![]() Take a look at the net profit margin formula above. Remember that net profit = total revenues - total expenses, with total expenses including operating expenses, interest expenses, and taxes. (Important: the data you are looking for may sometimes be found under the "net income" category.) To quickly calculate the net profit margin, follow these easy steps:įind out a company's net profit by looking at its financial statement. Are expenses misdirected? Are investments unproductive? Maybe it's just poor customer service? If you notice a consistent downward trend in this index, maybe it's time to ask if there's something bad going on. The net profit margin formula is also a convenient way to warn you if there's something wrong with a company. In order to get your hands on the net profit, you have to consider all of the operating expenses, interest expenses, and taxes. However, the net profit margin is not merely the amount of cash left in the company after all costs (e.g., salaries, utilities, or depreciation) are covered. The net profit margin formula may approximate the efficiency of this process. Revenues, in turn, are converted into income. This indicator is based on the idea that each sale a company makes translates into revenue. Unlike these indexes, the net profit margin compares net income to total revenue. It's often used to complement well-known efficiency measures that rely on the asset or equity values. The net profit margin is one of the basic profitability ratios you can find in financial analytics. ![]()
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