How to Calculate Net Profit Margin
Net profit margin is the percentage of revenue that survives every expense — cost of goods sold, operating costs, interest, and taxes — to become actual profit. It’s the most complete of the margin metrics, and because it accounts for everything, it’s also the one that varies most between a lean operator and a business carrying heavy overhead.
Calculate it
Worked examples
Worked Example 1 — Digital Marketing Agency
A marketing agency generates $320,000 in annual revenue and keeps $48,000 as net income after every expense and tax. Net profit margin = ($48,000 ÷ $320,000) × 100 = 15%.
Worked Example 2 — Restaurant
A restaurant generates $900,000 in annual revenue but keeps only $27,000 as net income after food costs, labor, rent, and taxes. Net profit margin = ($27,000 ÷ $900,000) × 100 = 3%.
Both businesses are profitable, but the agency converts sales into profit five times more efficiently than the restaurant — a gap that reflects the cost structure of the industry as much as anything either owner is doing right or wrong. Finmap calculates net profit margin automatically from your connected accounts and tracks it alongside gross margin, so you can see exactly where the difference between the two is opening up or closing.
Track this metric automatically
Finmap calculates it from your connected accounts and shows the trend over time — no spreadsheets to rebuild each month.
More calculators
Gross Margin Calculator
What share of each sales dollar is left after the direct cost of what you sold.
EBITDA Calculator
Core operating earnings before interest, taxes, depreciation, and amortization.
Working Capital Calculator
The cushion left to fund day-to-day operations after near-term obligations.
Current Ratio Calculator
A quick read on whether current assets can cover current liabilities.
DSO Calculator
The average number of days it takes to collect payment after a sale.