From net income and revenue, compute the ratio of how much each dollar of revenue turns into net profit.
Input Data
Results
At a glance:Net profit margin is net income divided by revenue, showing how much profit is earned per dollar of sales after all obligations.
Formula
netProfitMargin = netIncomeAmount / revenueAmount × 100%
$$\text{Net Profit Margin} = \dfrac{\text{Net Income}}{\text{Revenue}} \times 100\%$$How to Use
- Enter the net income.
- Enter the revenue.
- Read the net profit margin percentage.
FAQ
What is a good net profit margin?
There is no universal standard — it varies enormously by industry. Software or premium brands may achieve double digits or more, while retail and trading with thin margins may sit at only a few percent. Rather than comparing against arbitrary figures, compare against peers and your own history, watching the trend and stability. A consistently positive and gradually rising margin usually signals sound operations.
Is a falling net profit margin always bad?
Not necessarily. It may be a strategic price cut to grab market share, increased investment (marketing, R&D) for future growth, or a one-off expense (impairment, restructuring) dragging it down. You should separate structural causes (worsening costs/pricing) from temporary ones. Looking at the 'recurring net margin' after stripping out non-recurring items reflects the true operating trend better.
How is net profit margin related to ROE?
In DuPont analysis, ROE = net profit margin × asset turnover × equity multiplier. The net margin reflects profit-making efficiency, the turnover reflects asset-use efficiency, and the equity multiplier reflects financial leverage. The same ROE can be reached by different combinations; breaking it down shows whether a company earns its return from high margin, high turnover, or high leverage, helping judge sustainability and risk.
How does Hong Kong's profits tax affect the net profit margin?
Hong Kong uses a two-tier profits tax: the first HK$2,000,000 of assessable profits for corporations is taxed at 8.25%, and the portion above at 16.5% (for unincorporated businesses, 7.5% and 15%). Tax is the last deduction before net profit, so a higher rate lowers the net margin. SMEs benefit from the low first HK$2m rate, giving a relatively higher post-tax margin; large companies above the threshold pay the standard rate and feel the tax drag more. Please refer to the Inland Revenue Department (IRD) for details.
Should I look at net profit margin together with gross and operating margins?
Yes. The three are the layers down the income statement: gross margin deducts only direct costs, operating margin further deducts operating expenses, and net margin finally deducts interest and tax. Viewing their trends side by side shows where profit leaks — at production/procurement, operations management, or the financial/tax layer — which is far more actionable than net margin alone.
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.