net profit margin
Definition
Net profit margin measures the percentage of revenue converted into net income after all expenses, including COGS, operating costs, interest, and taxes, are deducted. It is calculated as Net Income divided by Net Sales. This comprehensive profitability ratio shows how effectively a company controls costs and generates bottom‑line returns. A higher net margin indicates superior cost management, efficient operations, and favorable financing or tax structures. Conversely, a lower margin may point to high debt servicing costs, inefficiencies, or non‑operational losses. Investors and analysts compare net profit margins across companies and industries to evaluate overall financial performance, taking into account differences in capital structure, regulation, and economic cycles that influence profitability.
See also
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