What is a Net Profit Margin calculator?
A net profit margin calculator is a simple calculator that helps you calculate the profit from the total revenue generated in the company. This calculation is important for big business owners, shareholders, small business owners, and Investors to know the profit from the revenue and expenses in their firm. The Net Profit calculator (Also called Net Income calculator). These are essential things for the business and being profitable is the most important for a company to run for a long time. We created this calculator keeping business people in mind. Let’s understand what is Net Profit Calculator and How to calculate and use it for your business.
Net profit Formula
The Net profit margin is attained by dividing Net profit by Total revenue.
Here is the Formula
Net profit Margin = Net profit /Total revenue
I.e. Net profit = Revenue – cost
Total Revenue is the total money earned.
How to Calculate Net Profit Margin?
To determine net profit margin, these three steps can be followed
- Determine the Total revenue from the sales of your company.
- Calculate the total expenses like manufacturing, interest, labor, taxes, etc.
- Now subtract the total expenses from the revenue.
Net Profit Margin=(Net Profit/Revenue)
To calculate the percentage from it, multiply the above formula by 100.
Net Profit Margin=(Net Profit/Revenue) x 100
Example
Let’s say Company “Z” has a revenue of $500000, manufacturing and advertising cost of $150000, operating expenses be $70000 and taxes be $120000.
Net profit = $500000 – ($150000+$70000+$120000) = $160000.
Net Profit Margin=(Net Profit/Revenue) x 100
Net Profit Margin=(160000/500000) x 100
You get
Net profit as $160000
Net Profit Margin as 32%
Profit percentage as 47%
All these calculations are simplified and we have given a simple calculator that you have to enter your company revenue and cost and you will get the whole thing(Net profit, Net Profit Margin, and Profit percentage) calculated for you in a second and its saves your time because time is the most precious thing in business.
What is considered a good net profit margin in business?
To be frank, it differs from business to business and understanding your net profit margin is very important to find the insight of your business. This particular metrics helps you determine how much your revenue is turned into actual profits after deducting all the expenses of your business. But what is considered a good net profit margin in business. The answer is, it depending on your industry and business model you follow.
Lets see each industry and their net profit margin.
Retail Industry: The retail industry generally operate with less net profit margin due to numurance factors like high competitions and operating cost. A net profit margin of 2% to 5% is considered to be the best in this retail industry.
Healthcare Industry: Healthcare and pharmaceutical industry generally have high net profit margin because of the demand and nature of the products and services they offer. Margin ranging from 10% to 15% is considered to be good in this industry and some companies achieve more margins depending upon the market and product quality.
Manufacturing industry: This industry will have 5% to 10% margins and it totally depends on the efficiency of the management and cost.
Financial industry: Bank and Investments company will have 15% to 20% margins and it depends on the revenue model.
Tech Industry: In tech industry is the most trendy and evergreen industry in the world and software companies make upto 20% profit margin and even more when lowering the labour cost.
How to calculate net profit margin
Net profit margin can be easily be calculated by the formula
Net Profit Margin = (Net Profit/Revenue) x 100
We created this calculator based on this formula and you dont need to waste your time calculating manually and you just have to enter the values and you will get results in a second.