Definition of Annual Net Profit Margin
A Net Profit Margin is the ratio of a company’s net profits to revenues. The formula to calculate Net
Profit Margin is:
Net Profit Margin = Net Profit* / Revenue * 100
*Net profit = Revenue - Cost of goods - Operating Cost - Other Expenses - Interest - Taxes
Net Profit Margin is expressed as a percentage, which means that you can compare the financial health of
multiple companies.
A company can use its Net Profit Margin to understand whether its strategies and business models are
effective.
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