Net Profit Margin

Indicator of a company’s efficiency.  

A good company has constant strong earnings and cash flow.

The higher the Net Profit Margin, the better it is

Net Profit Margin = net profits/sales

= bottom line/total sales

Net profit margin is the ratio of net profits to sales.  It is a good indicator of a company’s efficiency because it takes into account all expenses of the company.  A high ratio indicates a more profitable company.

For example, if a company has a 20% profit margin, it means the company has a net income of $.20 for each $1.0 of sales.

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