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The net profit margin figures how much net income is generated as a percentage of revenue.

Calculate net profit margin by dividing net income by revenue then multiplying it by 100, where net income is equal to total revenues subtracted by total expenses.

Formula:

Net income = total revenues - total expensesNet Profit Margin =

x 100Net income Revenue Or with more details:

Net Profit Margin =

x 100Revenue - COGS - E - I - T Revenue where:

COGS = cost of goods sold

E = Operating and other expenses

I = Interest

T = TaxesExample: A company report for the end of the year has revenue equal to $80,000, net income was $10,000. The net profit margin of this company is calculated by dividing net income by its revenue, multiplying it by 100 to get the net profit margin in percentage.

Net Profit Margin =

x 100 =(10000 ÷ 80000) x 100 = 0.125 x 100 = 12.5%10000 80000 The net profit margin of this company equals 12.5%, which means that for every dollar generated by this company in sales, the company kept $0.125 as profit.

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