Net profit margin
Principles of Finance glossary · Financial Statements, Markets & Working Capital
Definition
Net income divided by revenue; the bottom-line profitability measure.
Net profit margin in plain English
Net profit margin tells you how many cents of actual keep-it profit a company squeezes out of each dollar of sales, after every single cost is paid, including wages, materials, interest, and taxes. If a lemonade stand takes in $100 and gets to keep $12 once everything is paid, its net profit margin is 12 percent. It's called the 'bottom line' because it's literally the last number at the bottom of the income statement, and it reveals whether a business that looks busy is actually making money.
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