Net profit margin

Net Profit Margin is a ratio that shows what percentage of a company’s revenue is retained as net profit after all expenses, taxes, and interest are paid. It indicates how efficiently a business turns sales into actual profit.

Formula:

Net Profit Margin (%)=Net ProfitRevenue×100\text{Net Profit Margin (\%)} = \frac{\text{Net Profit}}{\text{Revenue}} \times 100Net Profit Margin (%)=RevenueNet Profit​×100Where:

1. Net Profit = Revenue − All expenses (operating costs, taxes, interest, etc.)
2. Revenue = Total sales or income

Importance:

1. Shows profitability and operational efficiency.
2. Helps compare performance with other companies or past periods.
3. Provides insight for investors about returns and financial health.

Example:

A company earns ₹10,00,000 in revenue and has a net profit of ₹1,50,000.

Net Profit Margin=1,50,00010,00,000×100=15%\text{Net Profit Margin} = \frac{1,50,000}{10,00,000} \times 100 = 15\%Net Profit Margin=10,00,0001,50,000​×100=15%This means the company keeps 15% of its revenue as profit after all expenses.