Net Profit Margin.
A definition, in plain English — with the books that teach it.
What it means
Net profit margin is the percentage of revenue that remains as net income after all expenses — including cost of goods sold, operating expenses, interest, and taxes. It is the "bottom line" profitability ratio and the most comprehensive measure of a company's ability to convert revenue into profit available to shareholders. Net margin varies widely by industry: software companies can achieve 20-30%, while grocery retailers might earn 1-3%. Comparing margins within an industry is more meaningful than across industries.
Example
A manufacturer earns $50 million in revenue and posts $4 million in net income after all costs and taxes. Net margin = $4M / $50M = 8%. If a new tax provision raises the effective tax rate, net income could drop to $3.5 million, compressing margin to 7% on the same revenue.
