Updated · Built and checked by the PlinzoTools team, formulas tested against published sources
Calculate net profit margin from total revenue and net income after all expenses.
12.00%
Net profit margin is the percentage of revenue left as actual profit after ALL expenses -- operating costs, interest, and taxes -- have been subtracted. It's the true "bottom line" profitability measure.
Enter total revenue and net income (profit after all expenses). Net profit margin appears instantly.
Net Profit Margin % = (Net Income / Revenue) × 100
With the default values, revenue is 100,000 and net income is 12,000, so net profit margin is 12 percent. Here is how a hypothetical small business might get there, to show where net income comes from:
Only the final line goes into the calculator. The gross margin in this example is 45 percent, but the net margin is 12 percent, since more than three-quarters of the gross profit is used up by expenses, interest and tax.
The calculator does not subtract anything itself. It simply divides the net income you provide by revenue, so if you enter profit before tax, you are computing a pre-tax margin, which is a different measure. Say which one you used when you share the figure.
A net margin tells you how much of each unit of sales survives as final profit. Trends matter more than a single reading: look at whether the margin is improving over several periods, and whether changes come from pricing, cost control, or one-off items. A sudden jump may be caused by a one-time gain such as an asset sale, and a sudden dip by a one-time cost such as a legal settlement, so it can help to compare with figures that exclude unusual items.
Margins differ greatly by sector, so comparisons should be made with businesses of a similar type and size that use similar accounting choices. Avoid drawing conclusions from a single number quoted without context.
Track the ratio period over period, set a target margin for budgeting, and use the difference between gross and net margin to see whether the problem lies in production cost or in overhead. For statutory reporting, tax returns or business valuation, defer to your accountant, since the appropriate definition of net income depends on the accounting rules that apply to you.
Because it accounts for more costs -- operating expenses, interest, and taxes on top of COGS. See the Gross Profit Calculator for the earlier-stage figure.
Yes. If net income is a loss, the margin will be negative, showing that expenses exceeded revenue in that period.
For a true net margin, enter income after tax, interest and all other expenses. Entering pre-tax profit gives a pre-tax margin, which is a different and higher figure.
Yes. Use figures from the same month, quarter or year, otherwise the ratio will be meaningless.
Net margin divides by revenue, so zero revenue would require division by zero. Enter a non-zero revenue amount.
Reference: Consumer Financial Protection Bureau