Overview

Net profit margin is one of the most commonly used profitability ratios for measuring the amount of net profit or net income a business earns for every dollar of revenue generated. The formula for calculating the net profit margin ratio is as follows:

Net Profit Margin = Net Profit / Total Revenue x 100

Net profit is the amount left after subtracting all of a company's expenses from its total revenue. While the net profit margin indicates a company's overall profitability, it should be used along with other financial metrics such as EBITDA and operating profit to provide a better evaluation of a company's performance.

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