Net Profit Margin
Net profit margin shows how much of a company's revenue remains as net profit after expenses.
Start the lessonIntroduction
Net profit as a share of revenue
Net profit margin shows how much net profit a company reports for each rupee of revenue. Net profit is calculated after relevant operating costs and other items such as interest and tax, according to the company's financial reporting.
The short answer
Net profit margin = net profit ÷ revenue × 100. It can be positive or negative and should be read alongside the underlying results.
The formula
Divide net profit by revenue
Net Profit Margin = Net Profit ÷ Revenue × 100
The calculation uses net profit and revenue for the same reporting period. Check how a source defines each figure and whether it uses consolidated or standalone results.
₹1,000 example
Calculate an illustrative net margin
If revenue is ₹1,000 and net profit is ₹100, the net profit margin is 10%.
Illustrative net profit margin
10%
₹100 net profit ÷ ₹1,000 revenue × 100
A negative net profit is valid and produces a negative margin. This example is for learning, not data from a specific company.
Operating vs net margin
They include different costs
Differences between these margins can prompt questions about interest costs, tax, or other items, but the financial statements are needed to understand the reasons.
Key points
What to remember
- Net profit margin = net profit ÷ revenue × 100.
- It shows net profit as a percentage of revenue.
- A negative margin indicates a net loss relative to revenue for the period.
- Net profit margin includes more than operating margin, such as interest and tax.
- Compare similar companies and check trends across periods.
- One margin figure does not guarantee future performance or returns.
This lesson is for education only, not personalized financial, tax, or investment advice. Investments in securities are subject to market risks.
Test yourself
5-question quiz
Choose one answer for each question, then check your score.