Net Profit Margin Calculator Formula

Understand the math behind the net profit margin calculator. Each variable explained with a worked example.

Use the Net Profit Margin Calculator

Formulas Used

Net Profit Margin

net_margin = revenue > 0 ? (net_income / revenue) * 100 : 0

Total Expenses

total_expenses = revenue - net_income

Expense Ratio

expense_ratio = revenue > 0 ? ((revenue - net_income) / revenue) * 100 : 0

Variables

VariableDescriptionDefault
revenueTotal Revenue(USD)1000000
net_incomeNet Income(USD)120000

How It Works

How to Calculate Net Profit Margin

Formula

Net Profit Margin = (Net Income / Revenue) x 100

Net profit margin is the ultimate bottom-line measure. It accounts for every cost the business incurs: cost of goods, operating expenses, interest, taxes, depreciation, and one-time charges. Tracking this metric over time reveals whether the company is converting an increasing share of revenue into profit.

Worked Example

A company generated $1,000,000 in revenue and $120,000 in net income.

revenue = 1000000net_income = 120000
  1. 01Net Profit Margin = ($120,000 / $1,000,000) x 100 = 12%
  2. 02Total Expenses = $1,000,000 - $120,000 = $880,000
  3. 03Expense Ratio = $880,000 / $1,000,000 x 100 = 88%

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