What Is Net Profit Margin? | Stock Market For Beginners | Investing In Stocks For Beginners

Описание: What Is Net Profit Margin? | Stock Market For Beginners | Investing In Stocks For Beginners

In today’s video, I’m going to be talking about what is net profit margin. Let's get straight into it.

The net profit margin measures how much net income or profit is generated as a percentage of revenue. The net profit margin illustrates how much of each pound in revenue collected by a company translates into profit. The ratio helps investors assess if a company's management is generating enough profit from its sales and whether operating costs and overhead costs are being contained.

Net profit margin is one of the most important indicators of a company's financial health. By tracking increases and decreases in its net profit margin, a company can assess whether current practices are working and forecast profits based on revenues. Because companies express net profit margin as a percentage rather than a dollar amount, it is possible to compare the profitability of two or more businesses regardless of size.

High-profit margin sectors typically include those in the services industry, as there are fewer assets involved in production than an assembly line. Similarly, software or gaming companies may invest initially while developing a particular software/game and cash in big later by simply selling millions of copies with very few expenses. Luxury goods and high-end accessories also often operate on high-profit potential and low sales.

Net profit margin shouldn’t be used in isolation as it doesn’t tell you the full story of a company. It should be used alongside other tools & ratios during fundamental analysis.

Thank you for watching!

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