Net Profit
Business: Cambridge International GCSE (2027 Exams), topic 5.5.4
Net Profit
Net profit is the profit left over after all costs have been taken away from revenue. Net profit is equal to total revenue minus total costs. Expenses like advertising, insurance, rent and business rates are taken away before calculating net profit.
Net profit margin
- This is net profit as a percentage of revenue:
- Net Profit margin (%) = (Net Profit/Revenue) x 100
- It is a measure of how efficiently a company can turn sales into profit and so is an important indicator of the firms performance.
Higher net profit margin is better
- The higher the net profit margin, the better it is for a firm as they are able to turn a higher percentage of revenue into profit.
Test yourself on Net Profit
Why is a higher net profit margin better for a firm?