net profit margin

Definition

Net profit divided by net revenues, often expressed as a percentage. This number is an indication of how effective a company is at cost control. The higher the net profit margin is, the more effective the company is at converting revenue into actual profit. The net profit margin is a good way of comparing companies in the same industry, since such companies are generally subject to similar business conditions. However, the net profit margins are also a good way to to compare companies in different industries in order to gauge which industries are relatively more profitable. also called net margin.

For more information, see Net vs Gross.

Use net profit margin in a sentence

You should always keep a close eye on your net profit margin so you know where it is that you stand.

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I had to determine the net profit margin and it was a long process that I was not looking forward to at all.

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The net profit margin of the young startup was impressive so once they went public we immediately invested in them.

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