Use our net profit margin calculator to work out both net profit and % profit margin
Knowing how much profit your business makes is important. The business may have great sales, but if all the sales are eaten up by cost of sales and expenditure the business can not survive.
A high net profit margin normally means that your sales are calculated at around the right price. If the figure is low, it is worth spending some time reviewing both sales prices and overheads to see where improvements can be made.
This figure is normally calculated over a period of time, which can be month, quarter or year.
Net Profit Example
An example is a business has 10,000 sales in a year, the cost of sales (purchases of products for sale and other direct costs) is 1,500, there are also other general overheads (utilities, rent, wages and taxes) of 3,000. The Net profit is 10,000 minus 1,500 minus 3,000 giving a figure of 5,500.
Calculate Net Profit Margin
To calculate the net profit margin, divide your sales income by your net income.
Net Income / total sales = net profit margin
In the example above it is as follows:
5500 / 10000 = 0.55
To find the percentage multiply by 100 = 55%
This means that 55% of revenue is profit.
Return from net profit margin calculator to Profit and loss statement