Net Profit Margin

Net Profit Margin tells you exactly how the managers and operations of a business are performing. Net Profit Margin compares the net income of a firm with total sales achieved. The formula for Net Profit Margin is: Net Profit Margin = Net Income / Sales

For example, consider a firm that has an annual net income of $500,000 while the total sales achieved during the

year amount to $2,200,000. What's the Net Profit Margin?

Net Profit Margin = 500,000 / 2,200,000

Net Profit Margin = 22.7%