Which formula is used to calculate net profit margin?

The net profit margin is an important financial metric that indicates how much profit a company makes for every dollar of sales revenue. To calculate this, the appropriate formula is taking the net profit divided by sales revenue and then multiplying by 100 to convert it into a percentage. This measure reflects the efficiency of a company in converting sales into actual profit after all expenses, taxes, and costs have been accounted for.

Using net profit gives a clear picture of the profitability of the company, incorporating all operating and non-operating expenses, which is why this formula is widely used to gauge financial health and operational efficiency. A higher net profit margin indicates better financial performance and greater profitability from each sales dollar, making it a key focus for business management and investors analyzing profitability trends over time.