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What is Net Profit Margin?

Investors and lenders often use net profit margin to determine whether a company is keeping operating costs down and generating enough net profit from sales. Changes in net profit margin enable companies to see whether certain strategies and practices are panning out. Companies can also use their net profit margin to create revenue forecasts and determine how much profit they will likely bring in over time. 

Net profit margin is calculated by dividing your net profit by your gross revenue and multiplying that amount by 100 to get the percentage. 

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