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Profitability & returns

Net Profit Margin

The share of revenue that becomes bottom-line profit after every cost, including interest and taxes.

Part of the Profitability & Quality course · Lesson 3 of 19
Formula
Net Income / Revenue

What it is

Net profit margin measures how many cents of every revenue dollar a company keeps as final profit after all expenses are paid, including cost of goods, operating costs, interest, taxes, and one-time items. It is the most complete margin because it reflects the entire income statement down to net income. It is often simply called net margin or the bottom line.

Why it matters

Net margin tells you the overall profitability that ultimately accrues to shareholders, and it ties directly into returns measures like return on equity. Because it includes interest, taxes, and unusual items, it can be distorted by one-time gains or losses, tax changes, or heavy debt, so a single year can mislead. Comparing several years and checking against operating margin helps reveal whether the bottom line reflects the real business or accounting noise.

How it's calculated

Divide net income (the final profit after all expenses, interest, and taxes) by revenue, expressed as a percentage.

How Quintarthai uses it

Net margin is featured in the Summary Key-metrics grid and in the profitability ratios on a company's deep-analysis page, and is a filterable metric in the Stock Screener.

Cross-border note. Net margin is a ratio, so it is currency-neutral, but the underlying net income follows IFRS for Canadian issuers and US GAAP for US issuers, which can treat items like impairments and stock-based compensation differently when comparing a TSX name to a US peer.

FAQ

Can net margin be negative?
Yes. If a company's total costs exceed its revenue, net income is negative and so is net margin, indicating the company lost money over the period.
Why is net margin lower than operating margin?
Net margin subtracts interest and taxes (and any one-time items) on top of operating costs, so it sits below operating margin unless unusual gains push it up.
Related terms
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