One of the very first things investors like to look at in a company is profit. If profits are increasing consistently every year, then it usually means the company is growing and doing well. But is it always the case where growing profits simply mean that a company is growing bigger and better? To gain a clearer picture of a company’s growth, you need to look at its net profit margin.

What is profit margin?

Net profit margin is simply the amount of profit its keeps for every dollar of revenue. The higher the margin, the more profitable a company is for every dollar it makes in revenue. Net profit margin is displayed as a percentage (%). For example, if a company makes $1 million in revenue and has expenses of $800,000, its profit is, therefore, $200,000 and its margin is 20%. So what does this have to do with ......