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Out of every ₹100 of sales, how much does the company actually keep?

Net Profit Margin

Lesson 1 of 11 · Profit

Net profit margin is the share of sales left as profit after every cost, interest payment and tax.

In everyday life

You sell ₹100 of samosas at a school fair. After paying for potatoes, oil, the stall and the gas, ₹12 is left in your pocket. Your net margin is 12%.

How it's worked out

Example: Sunrise Tea, a made-up company that sells packaged tea across India.

Net profit
what the company keeps after paying every cost, interest and tax
₹150 Cr
Sales
all the money that came in from selling its products
₹1,100 Cr
× 100
Net margin
13.6%

In words: ₹13.6 kept as profit from every ₹100 of sales.

Try it yourself

Move the sliders and watch the answer, the picture and the verdict change together.

₹ Cr
₹0 Cr₹500 Cr
₹ Cr
₹50 Cr₹5,000 Cr
Net marginDecent
13.6%

₹13.6 kept as profit from every ₹100 of sales.

  • Net profit
  • The rest

Each dot is 1 of every 100 in “sales”.

Rough guide

Net margin 13.6%
  • Thin
  • Decent
  • Strong

What's a good number?

  • Thin

    Up to 5%

  • Decent

    5% to 15%

  • Strong

    Above 15%

Supermarkets live on 2–4% and are fine; software firms often keep 15–20%. Compare with companies in the same business.

How to read it

Good signs

  • The margin holds steady or rises over 5 years.
  • It is higher than most rivals in the same industry.

Watch out for

  • A one-off gain, like selling land, can make a single year's margin look great. Check the next year.
  • A falling margin while sales rise means costs are growing faster than sales.
All lessons

For learning only. Example companies are made up, and the rough guides are rules of thumb, not targets. Nothing here is advice to buy or sell any stock.