Net Profit Margin Ratio

The Net Profit Margin Ratio or net margin is used to determine a company’s profitability. It determines how much they keep for every dollar that they sell. The formula looks like this

( Net Renvenue After Taxes) / (Net Sales)

This number is often expressed as a percentage. So if the net margin was 30% that would mean the company keeps 30% of the profit that they sell. This due to taxes and other expenses a firm might incounter.

The higher the number is the better investment the company is supposet to be.

It is important to compaire this number to other companies in the same industry group in order to get a more accurate picture. For example some industries that have lots of competing companies will have low net profit margins. While other industries with less compation will be higher on average.

Return From Net Profit Margin Ratio to Fundamental Analysis