Net profit margin

Definition

Net profit expressed as a percentage of sales revenue: $\frac{\text{net profit}}{\text{sales revenue}}\times100$ .

Used by AQA, Edexcel and OCR

Paper 1, Paper 2

The percentage of revenue remaining as net profit: $\frac{\text{net profit}}{\text{revenue}}\times100$ .

1
Use revenue as the denominator for both margins; net profit margin is not net profit divided by gross profit.

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A net profit margin of 10% means 10p remains after other operating expenses have also been deducted.

Net profit expressed as a percentage of sales revenue.

Specification 2.4.1 · Paper 2

Net profit expressed as a percentage of sales revenue, showing the proportion remaining after cost of sales, other operating expenses and interest.
If gross profit margin stays at 40% but net profit margin falls, the business is retaining the same proportion after direct costs but less after its other expenses and interest. Increased rent or marketing expenses could explain this pattern.
Revise: Business Calculations

Paper 2

Net profit expressed as a percentage of total revenue: $\frac{\text{net profit}}{\text{total revenue}}\times100$ .
The net profit margin has also fallen, so the shop retains less final profit from each £1 of sales. Its increased revenue has not translated into improved profitability.
Revise: Profitability Ratios