Net Profit Margin Calculator
Calculate net profit margin by deducting all costs — COGS, operating expenses, taxes, and interest — from revenue.
How to use this tool
- Enter total revenue, cost of goods sold (cogs), operating expenses (sg&a, r&d) and interest & taxes in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your net profit margin and the full breakdown beneath it.
Net profit margin is the 'bottom line' — what percentage of revenue you actually keep after all expenses, interest, and taxes. It's the ultimate measure of business profitability.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Net Income = Revenue − COGS − Operating Expenses − Interest & Taxes
Net Profit Margin = (Net Income ÷ Revenue) × 100
How it works
This calculator subtracts every major cost layer — cost of goods sold, operating expenses (SG&A, R&D), and interest and taxes — from total revenue to arrive at net income. The net profit margin expresses that bottom-line figure as a percentage of revenue, showing how many cents of profit remain from each dollar earned. Results assume all inputs reflect the same accounting period and that revenue is non-zero.
Worked example
- Start with revenue of $1,000.
- Subtract COGS ($400): $1,000 − $400 = $600.
- Subtract operating expenses ($250): $600 − $250 = $350.
- Subtract interest & taxes ($150): $350 − $150 = $200 net income.
- Net profit margin = $200 ÷ $1,000 × 100 = 20%.
Net income: $200; Net profit margin: 20%
Common mistakes to avoid
- Forgetting to include all operating expenses such as depreciation, amortization, or stock-based compensation, which overstates net margin.
- Using net profit margin to compare companies without adjusting for differences in tax rates or capital structure (interest expense).
- Confusing operating margin with net margin — a company can have a healthy 20% operating margin but a slim 5% net margin after interest and taxes.
Key terms
- COGS (Cost of Goods Sold)
- Direct costs of producing the goods or services sold — raw materials, direct labour, manufacturing overhead.
- Operating expenses
- Indirect costs of running the business, such as selling, general & administrative (SG&A) and research & development (R&D) expenses.
- Net income
- Revenue minus all costs, including COGS, operating expenses, interest, and taxes. The true 'bottom line' profit.
- Net profit margin
- Net income divided by revenue, expressed as a percentage. Indicates how efficiently a company converts sales into profit.
- Interest & taxes
- Non-operating charges: interest paid on debt and income tax owed, deducted after operating income is calculated.
Frequently asked questions
- What is the difference between gross and net profit margin?
- Gross margin only subtracts COGS. Net margin subtracts everything: COGS, operating expenses (salaries, rent, marketing), interest, and taxes. A company can have a healthy gross margin but a thin or negative net margin due to high overhead.
- What is a good net profit margin?
- Net margin benchmarks: Software/SaaS 10–25%+; Retail 2–5%; Restaurants 3–9%; Manufacturing 5–10%. Net margin below 0% means the business is unprofitable at the bottom line.