Net profit margin is what an entrepreneur ultimately strives toward. A higher profit margin implies that a company is more efficient at converting sales into actual profit. In fact, it can turn out to be an accurate point of reference to gauge the potential of a company’s operations and cost-control measures.
Net Profit Margin = Net profit /Sales * 100.
In simple terms, net income is the residual of all revenues and gains over all expenses and losses during a particular period. It can also be defined as the net increase in shareholder’s equity, which the company can retain as earnings or distribute among shareholders as dividend.
Moreover, the strength in the metric not only attracts new investors but also draws well-skilled employees who eventually add to the value of the business.