Net Profit Margin
Learn how to calculate and interpret Net Profit Margin with its formula, a worked example, industry context and common mistakes.
Measures how much of each revenue unit remains as profit after all expenses.
Formula
Net Profit Margin = Net Income / Revenue x 100%
Worked example$1.2 billion of net income on $10 billion of revenue gives a 12% net profit margin.
Calculation steps
- Find net income: $1.2 billion.
- Use $10 billion of revenue from the same period.
- Divide and multiply by 100 to get 12%.
How to interpret it
A durable margin indicates that the business retains profit after operating costs, financing, taxes, and other items.
Industry context
Normal net margins vary substantially by industry, capital intensity, regulation, and business maturity.
Accounting and market variations
Definitions, reporting choices, periods, capital structures, and market conventions can change how this metric should be compared.
- Look for one-time tax or asset-sale gains.
- Do not compare different reporting periods.
- Use attributable net income consistently.