Net Profit Margin Examples ,Samples,Illustration,Concept, Calculation Help Online
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What is net profit?
Net profit margin is basically the ratio between the net profit of the company and the revenue of the company. For calculating net profit margin, net profit is computed by deducting all direct and indirect expenses by total revenue of the company. Net profit is also known as net earnings or net income. Net profit margin is expressed in percentages. It is calculated with the help of income statement of the year. The net profit margin is intended to be a measure of the overall success of the company or business. A high net profit margin is the symbol of excellent growth of the business entity. The success of a business depends upon its net profit margin percentage.
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Formula for computing net profit margin
For computing net profit margin given formula is used-
Net profit margin= net profit / revenue
Net profit margin = net income / net sales
Example of net profit margin
EXAMPLE: The net profit of a company for the financial year 2015-16 was $500000 and the net sale by the company for the following year is recorded as $3000000. Calculate the net profit margin percentage of the company for the year 2015-16.
SOLUTION: Net profit margin = net profit/ net sales = $500000/$3000000 = 0.16 or 16 %.
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