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What does a net profit margin of 10% mean?

Asked 2 years ago

Hi guys. I found an example of a business with a net profit margin of 10%. Can you please remind me what the net part means again? I'm always getting it mixed up! Is it what is left after deductions, and gross before decutions? How would I calculate it into a percentage? Oh, and is 10% good or bad?

Scottie Gordon

Thursday, February 10, 2022

The net profit margin is the percentage of profit a company gets from its total revenue. Its formula is;

Net profit margin= Net profit/ revenue *100

A 10% net profit margin means that for every $1 of revenue the company earns $0.10. This means if a company's revenue is $20,000 and its net profit margin is 10%. Then the company gets a profit of $2,000.

Cody Sanders

Monday, September 26, 2022

A net profit margin is an indicator of a company's overall succes. A high NPM means that a company can effectively control its costs. While a low NPM means that a company uses an ineffective cost structure or poor pricing strategy.

It will depend on the type of industry you're in to known if a 10% net profit margin is good or bad.

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