what is profit margin formula
Net profit margin is the percentage of revenue left after all expenses have been deducted from sales. The measurement reveals the amount of profit that a business can extract from its total sales. The net sales part of the equation is gross sales minus all sales deductions, such as sales allowances. The formula is: (Net profits / Net sales) x 100 = Net profit margin. This measurement is typically made for a standard reporting period, such as a month, quarter, or year. The net profit margin is intended to be a measure of the overall success of a business. A high net profit margin indicates that a business is pricing its products correctly and is exercising good cost control.