Net Profit Margin
The percentage of revenue that becomes profit after all expenses, showing overall efficiency at converting sales into bottom-line earnings for shareholders.
Net Profit Margin
The percentage of revenue that becomes profit after deducting all expenses including operating costs, interest, taxes, and preferred dividends, calculated by dividing net income by revenue and multiplying by 100.
For example, a technology company with quarterly revenue of $20 million and net income of $3 million would have a net profit margin of 15% ($3 million ÷ $20 million × 100), meaning 15 cents of each revenue dollar becomes profit available to common shareholders.
Net profit margin represents a company’s overall profitability and efficiency at converting sales into bottom-line earnings. Higher margins indicate greater pricing power, cost control, or operational efficiency. This metric varies significantly by industry, with software and pharmaceutical companies typically enjoying higher margins than retailers or transportation companies. Comparing a company’s margin to industry peers and its own historical performance provides context for evaluation. Trends in net profit margin often reveal more insight than single-period measurements, helping identify improving or deteriorating financial performance.