Definition
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Net profit
Net profit: Net profit represents the profit made by a firm after having paid all its expenses from total revenue. It is calculated by deducting the following expenses from the company’s total revenue: Interest, tax, and operating cost. Net Profit = Total revenue – Total expenses Revenue is the total sales excluding discounts and refunds. Net profit serves as an indicator of the operational success of any business. It also talks about the firm’s ability to repay debt and reinvest.
Net profit margin
Net profit margin: Net profit margin is arrived at after deducting the amount of interest, taxes and operating expenses from net revenue. In short, it is the percentage of net income generated from revenue. Formula for net profit margin = (Net profit/ Total revenue) × 100 It is a profitability ratio expressed in percentage and is used to assess the financial wellbeing of a company. It is a stricter metric for measuring profitability because it considers all the business expenses.