Net Profit Margin Formula and Calculator

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Net Profit Margin Calculator

Net profit margin is the bottom line expressed as a percentage: net income divided by revenue. It shows how much of each unit of sales is left after every cost, including cost of goods sold, operating expenses, interest and taxes. It is the most complete single measure of profitability and the first component of the DuPont analysis.

How to use the formula

Because it sits at the end of the income statement, net margin can be affected by one-off items such as the sale of a building, a legal settlement or a tax adjustment. When comparing years or companies, check whether such items are included, or look at the operating margin as well.

A company with revenue of 500,000 and net income of 45,000 has a net profit margin of 9%: it keeps 9.00 of every 100.00 of sales. Net margins of 5–10% are typical for many established businesses, grocers can run at 1–3%, and software companies often exceed 20%. Multiply net margin by asset turnover and you get return on assets.

Frequently asked questions

What is the net profit margin formula?

Net profit margin = net income ÷ revenue × 100%.

What is a good net profit margin?

Around 10% is often called healthy and 20% high, but it depends strongly on the industry.

What is the difference between gross and net margin?

Gross margin only subtracts the cost of goods sold; net margin subtracts every expense, including interest and tax.

Can net margin be negative?

Yes, when the business makes a loss.

Last reviewed: September 26, 2026. Calculations run in your browser and were checked against numpy-financial, SciPy and published spreadsheet examples.