How to calculate your net profit margin

Written by michael keenan
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How to calculate your net profit margin
Higher net profits usually indicate more efficient companies. (Getty Images)

The net profit margin is one financial ratio used by investors to evaluate how a company performs. The net profit margin shows how much of a company's sales result in profit. In order to calculate the net profit margin, you need to know how much money was brought in through sales and how much profit the company made from sales. The net profit margin is typically expressed as a percentage.

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  1. 1

    Check the financial records for the company to find the company's total sales and the profit that resulted from those sales. For example, your company may have sold £292,500 worth of product and made a profit of £35,100 on those sales.

  2. 2

    Divide the profit by the total sales. In this example, you would divide your profit of £35,100 by your sales of £292,500 to get 0.12.

  3. 3

    Multiply the decimal from step 2 by 100 to convert it to a percentage and calculate your net profit margin. In this example, you would multiply 0.12 by 100 to find your net profit margin is equal to 12 per cent.

Tips and warnings

  • According to Investopedia, the net profit margin can also be referred to as the profit margin.

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