Net Profit Margin
Formula
Net Income ÷ Net Revenue
Definition
Net Profit Margin measures the percentage of net revenue remaining as profit after all expenses have been accounted for, including operating expenses, interest, taxes, depreciation, amortization, and other income or expenses.
It provides a bottom-line measure of profitability after both operating and non-operating items are considered.
Interpretation
A higher Net Profit Margin indicates that a greater share of revenue is ultimately converted into profit, while a negative margin indicates that the company is generating a net loss.
Because Net Profit Margin incorporates financing costs, taxes, and other below-EBITDA items, changes in the metric can reflect factors beyond underlying operating performance. It is therefore useful to evaluate Net Profit Margin alongside EBITDA Margin.
In MetricFrame
MetricFrame calculates Net Profit Margin by dividing Net Income by Net Revenue when below-EBITDA income or expense data is available.